Can value-based insurance impose societal costs?

Abstract

Background: Among policy alternatives considered to reduce health care costs and improve outcomes, value-based insurance design (VBID) has emerged as a promising option. Most applications of VBID, however, have not used higher cost sharing to discourage specific services. In April 2011, the state of Oregon introduced a policy for public employees that required additional cost sharing for high-cost procedures such as total knee arthroplasty (TKA).

Objectives: Our objectives were to estimate the societal impact of higher co-pays for TKA using Oregon as a case study and building on recent work demonstrating the effects of knee osteoarthritis and surgical treatment on employment and disability outcomes.

Methods: We used a Markov model to estimate the societal impact in terms of quality of life, direct costs, and indirect costs of higher co-pays for TKA using Oregon as a case study.

Results: We found that TKA for a working population can generate societal benefits that offset the direct medical costs of the procedure. Delay in receiving surgical care, because of higher co-payment or other reasons, reduced the societal savings from TKA.

Conclusions: We conclude that payers moving toward value-based cost sharing should consider consequences beyond direct medical expenses.

Keywords: cost sharing; societal benefits; total knee replacement; value-based insurance design.