strategies for transitioning to more value-based payment structures, Amita Rastogi of Bridges to Excellence discusses the promising effects of the PROMETHEUS (Provider payment Reform for Outcomes, Margins, Evidence, Transparency, Hassle-reduction, Excellence, Understandability, and Sustainability) payment system, based on a fee-for-episode system. She focuses in particular on the allowance in the PROMETHEUS system for potentially avoidable complications, which is designed to encourage reduction in such complications by at least 50 percent. Translating their estimates to the national level, she reports a potential cost savings of $165 billion nationally from reducing potentially avoidable complications in 13 medical conditions in the commercially insured population.

David R. Riemer of the Community Advocates Public Policy Institute highlights health insurance exchanges as a promising practice for introducing managed competition into the insurance market. Drawing on the lessons learned from one of the nation’s most long-lasting and successful exchanges, operated by the Wisconsin State Employee Health Plan in Dane County, he suggests that three conditions must be in place to maximize the ability of health insurance exchanges in lowering costs: the pool of potential enrollees should have an average or near-average risk profile; the pool of enrollees must be at least 20 percent of the population; and the enrollees must have clear financial incentives for selecting health insurance plans that have the lowest risk-adjusted bids.

Turning to consumer incentives, Niteesh K. Choudhry from Harvard University discusses value-based insurance design, focusing on the potential impact of tiering copayments for medications based on evidence-based value. He explains that, with insurance copayments set in a one-size-fits-all style, copayments for essential, high-value services are often set too high, and their resultant underuse leads to missed opportunities to prevent and treat morbid and expensive diseases while copayments for nonessential, low-value services are sometimes not set high enough to minimize their unnecessary use. Although the evidence base is limited, existing studies suggest that value-based insurance design for five chronic conditions may reduce costs by 1 to 6 percent, the equivalent of more than $2 billion annually. However, he cautions that these preliminary estimates, by necessity, aggregate groups of conditions into single disease categories, such as “heart disease,” do not account for patients with more than one related condition, and do not distinguish between the impact on patients of different disease severities. In a complementary discussion, Lisa Carrara of Aetna describes a variant of value-based insurance design with a discussion of tiered provider networks and consumer-directed health plans. Based on the experience of the Aetna Aexcel network of designating providers based on clinical quality and cost efficiency, she estimates that up to a 3 to 4 percent reduction in first year claims could be realized by customers if all Aetna patients demonstrated a 90 percent utilization of Aexcel-designated physicians.



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