PERSPECTIVES ON ESSENTIAL
HEALTH BENEFITS

WORKSHOP REPORT

Cheryl Ulmer, Bernadette McFadden, and Cassandra Cacace, Rapporteurs

Committee on Defining and Revising an Essential Health Benefits Package for Qualified Health Plans

Board on Health Care Services

INSTITUTE OF MEDICINE
OF THE NATIONAL ACADEMIES

THE NATIONAL ACADEMIES PRESS

Washington, D.C.

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PersPectives on essential HealtH Benefits Workshop Report Cheryl Ulmer, Bernadette McFadden, and Cassandra Cacace, Rapporteurs Committee on Defining and Revising an Essential Health Benefits Package for Qualified Health Plans Board on Health Care Services

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THE NATIONAL ACADEMIES PRESS 500 Fifth Street, N.W. Washington, DC 20001 NOTICE: The project that is the subject of this report was approved by the Governing Board of the National Research Council, whose members are drawn from the councils of the National Academy of Sciences, the National Academy of Engineering, and the Institute of Medicine. This study was supported by Contract No. HHSP23320042509XI, Task Order HHSP23337027T between the National Academy of Sciences and the Assistant Secretary for Planning and Evaluation of the U.S. Department of Health and Human Services. Any opinions, findings, conclusions, or recommendations expressed in this publication are those of the author(s) and do not necessarily reflect the view of the organizations or agencies that provided support for this project. International Standard Book Number-13: 978-0-309-21543-5 International Standard Book Number-10: 0-309-21543-9 Additional copies of this report are available from the National Academies Press, 500 Fifth Street, N.W., Lockbox 285, Wash- ington, DC 20055; (800) 624-6242 or (202) 334-3313 (in the Washington metropolitan area); Internet, http://www.nap.edu. For more information about the Institute of Medicine, visit the IOM home page at: www.iom.edu. Copyright 2012 by the National Academy of Sciences. All rights reserved. Printed in the United States of America The serpent has been a symbol of long life, healing, and knowledge among almost all cultures and religions since the beginning of recorded history. The serpent adopted as a logotype by the Institute of Medicine is a relief carving from ancient Greece, now held by the Staatliche Museen in Berlin. Suggested citation: IOM (Institute of Medicine). 2012. Perspectives on Essential Health Benefits: Workshop Report. Washing- ton, DC: The National Academies Press.

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“Knowing is not enough; we must apply. Willing is not enough; we must do.” — Goethe Advising the Nation. Improving Health.

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The National Academy of Sciences is a private, nonprofit, self-perpetuating society of distinguished scholars engaged in scientific and engineering research, dedicated to the furtherance of science and technology and to their use for the general welfare. Upon the authority of the charter granted to it by the Congress in 1863, the Academy has a mandate that requires it to advise the federal government on scientific and technical matters. Dr. Ralph J. Cicerone is president of the National Academy of Sciences. The National Academy of Engineering was established in 1964, under the charter of the National Academy of Sciences, as a parallel organization of outstanding engineers. It is autonomous in its administration and in the selection of its members, shar- ing with the National Academy of Sciences the responsibility for advising the federal government. The National Academy of Engineering also sponsors engineering programs aimed at meeting national needs, encourages education and research, and rec - ognizes the superior achievements of engineers. Dr. Charles M. Vest is president of the National Academy of Engineering. The Institute of Medicine was established in 1970 by the National Academy of Sciences to secure the services of eminent members of appropriate professions in the examination of policy matters pertaining to the health of the public. The Institute acts under the responsibility given to the National Academy of Sciences by its congressional charter to be an adviser to the federal government and, upon its own initiative, to identify issues of medical care, research, and education. Dr. Harvey V. Fineberg is president of the Institute of Medicine. The National Research Council was organized by the National Academy of Sciences in 1916 to associate the broad com - munity of science and technology with the Academy’s purposes of furthering knowledge and advising the federal government. Functioning in accordance with general policies determined by the Academy, the Council has become the principal operating agency of both the National Academy of Sciences and the National Academy of Engineering in providing services to the gov - ernment, the public, and the scientific and engineering communities. The Council is administered jointly by both Academies and the Institute of Medicine. Dr. Ralph J. Cicerone and Dr. Charles M. Vest are chair and vice chair, respectively, of the National Research Council. www.national-academies.org

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COMMITTEE ON DEFINING AND REVISING AN ESSENTIAL HEALTH BENEFITS PACKAGE FOR QUALIFIED HEALTH PLANS1 JOHN R. BALL (Chair), Former Executive Vice President, American Society for Clinical Pathology MICHAEL S. ABROE, Principal and Consulting Actuary, Milliman, Inc. MICHAEL E. CHERNEW, Professor of Health Care Policy, Harvard Medical School PAUL FRONSTIN, Director, Health Research & Education Program, Employee Benefit Research Institute ROBERT S. GALVIN, Chief Executive Officer, Equity Healthcare, Blackstone Group MARJORIE GINSBURG, Executive Director, Center for Healthcare Decisions DAVID S. GUZICK, Senior Vice President for Health Affairs, and President, UF&Shands Health System, University of Florida SAM HO, Executive Vice President and Chief Medical Officer, UnitedHealthcare CHRISTOPHER F. KOLLER, Health Insurance Commissioner, State of Rhode Island ELIZABETH A. McGLYNN, Director, Kaiser Permanente Center for Effectiveness & Safety Research AMY B. MONAHAN, Associate Professor, University of Minnesota Law School ALAN R. NELSON, Internist-Endocrinologist LINDA RANDOLPH, President and Chief Executive Officer, Developing Families Center JAMES SABIN, Clinical Professor, Departments of Psychiatry and Population Health, Harvard Medical School, and Director, Harvard Pilgrim Health Care Ethics Program JOHN SANTA, Director of Consumer Reports Health Ratings Center, Consumer Reports LEONARD D. SCHAEFFER, Judge Robert Maclay Widney Chair and Professor, University of Southern California JOE V. SELBY, Executive Director, Patient-Centered Outcomes Research Institute SANDEEP WADHWA, Chief Medical Officer and Vice President of Reimbursement and Payer Markets, 3M Health Information Systems Study Staff CHERYL ULMER, Study Director BERNADETTE McFADDEN, Consultant SHADIA BEL HAMDOUNIA, Research Associate CASSANDRA L. CACACE, Research Assistant ASHLEY McWILLIAMS, Senior Program Assistant (through July 2011) ROGER C. HERDMAN, Board Director 1 The report summarizes the views expressed by workshop participants, and while the committee is responsible for the overall quality and accuracy of the report as a record of what transpired at the workshop, the views contained in the report are not necessarily those of the committee. v

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Reviewers This report has been reviewed in draft form by individuals chosen for their diverse perspectives and technical expertise, in accordance with procedures approved by the National Research Council’s Report Review Committee. The purpose of this independent review is to provide candid and critical comments that will assist the institution in making its published report as sound as possible and to ensure that the report meets institutional standards for objectivity, evidence, and responsiveness to the study charge. The review comments and draft manuscript remain confidential to protect the integrity of the process. We wish to thank the following individuals for their review of this report: CINDY EHNES, President and CEO, California Children’s Hospital Association SHANA A. LAVARREDA, Director, Health Insurance Studies, and Research Scientist, UCLA Center for Health Policy Research ROBERT S. McDONOUGH, Head, Clinical Policy Research and Development, Aetna U.S. Healthcare SARA ROSENBAUM, Professor and Chair, Department of Health Policy, George Washington University School of Public Health and Health Services Although the reviewers listed above have provided constructive comments and suggestions, they were not asked to endorse the final draft of the report before its release. The review of this report was overseen by CHRISTINE K. CASSEL, American Board of Internal Medicine. Appointed by the Institute of Medicine, she was responsible for making certain that an independent examination of this report was carried out in accordance with institutional procedures and that all review comments were carefully considered. Responsibility for the final content of this report rests entirely with the authors and the institution. vii

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Acknowledgments The committee and staff are grateful to many individuals and organizations who contributed to the success of the two workshops. Many thanks to the individuals who testified before the committee during the workshops as well as to the numerous individuals who submitted materials to the committee throughout the study process. We would like to especially thank the employees of the National Academies who assisted us with the first workshop, coordinating meeting rooms, as well as setting up and controlling the video, audio, and webcast, and providing liaison with the press: Christian Dobbins, Eileen Milner, Patsy Powell, Christine Stencel, and Nicole Stephenson. Thanks too to Jordan Wyndelts for her work on the project website and development of the public input portal. Additional thanks to Institute of Medicine staff, including Abbey Meltzer for preparing the highlights document of this workshop report. Lastly, we would like to thank the sponsoring staff at the Office of Assistant Secretary for Planning and Evaluation, Department of Health and Human Services, including Sherry Glied, Richard Kronick, Caroline Taplin, Lee Wilson, and Pierre Yong, for their financial support and guidance on this project. ix

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Contents SUMMARY 1 1 INTRODUCTION 13 Exchanges and Essential Health Benefits, 13 Study Charge and Approach, 14 2 THE POLICY CONTEXT FOR ESSENTIAL HEALTH BENEFITS 17 Presentation by Dr. Sherry Glied, Assistant Secretary for Planning and Evaluation (ASPE), HHS, 17 Legislative Intent, 19 The Republican Perspective, 19 Presentation by Mr. Mark Hayes, Greenberg Taurig, LLP, 19 Presentation by Ms. Katy Spangler, Staff, Senate Health, Education, Labor, & Pensions (HELP) Committee, 20 The Democratic Perspective, 21 Presentation by Mr. David Schwartz, Staff, Senate Finance Committee, 21 Presentation by Dr. David Bowen, The Bill & Melinda Gates Foundation, 22 Contrasting Views, 22 Department of Labor (DOL) Surveys on Employer-Sponsored Insurance, 22 Presentation by Dr. Joseph Piacentini, EBSA, and Mr. William Wiatrowski, BLS, 23 References, 25 3 PURCHASER PERSPECTIVES ON THE EHB 27 Presentation by Ms. Jerry Malooley, U.S. Chamber of Commerce, 27 Presentation by Mr. Michael Turpin, USI Insurance Services, 29 Presentation by Ms. Helen Darling, National Business Group on Health, 31 References, 34 xi

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xii CONTENTS 4 STATE EXPERIENCES WITH DEFINING A MINIMUM BENEFIT STANDARD 37 Presentation by Dr. Jonathan Gruber, Massachusetts Institute of Technology (MIT) and the National Bureau of Economic Research (NBER), 37 Presentation by Dr. Jon Kingsdale, Wakely Consulting, 41 Presentation by Dr. Beth Sammis, Maryland Insurance Administration (MIA), 42 Presentation by Dr. Rex Cowdry, MHCC, 44 Presentation by Representative James Dunnigan, State of Utah House of Representatives, 46 Presentation by Mr. Matthew Salo, The National Governors Association, 48 References, 49 5 MEDICAL NECCESSITY AND USE OF EVIDENCE 51 Presentation by Dr. Alan Garber, VA Palo Alto Health Care System and Stanford University, 51 Presentation by Dr. Barbara Warren, Consumers United for Evidence-Based Healthcare (CUE), 55 References, 57 6 INSURER DECISIONS OF BENEFIT COVERAGE AND MEDICAL NECESSITY 59 Presentation by Dr. Louis Jacques, Centers for Medicare & Medicaid Services (CMS), 59 Presentation by Dr. Jeffrey Kang, CIGNA Corporation, 61 Presentation by Dr. Virginia Calega, Blue Cross and Blue Shield Association (BCBSA), 63 Presentation by Dr. Robert McDonough, Aetna, 65 Presentation by Ms. Carmella Bocchino, America’s Health Insurance Plans (AHIP), 67 References, 69 7 EXAMINING TWO CATEGORIES OF CARE IN SECTION 1302 71 Presentation by Dr. Kenneth Wells, David Geffen School of Medicine, UCLA, 71 Presentation by Dr. Kavita Patel, UCLA Semel Institute, 73 Presentation by Mr. Paul Samuels, Legal Action Center (LAC) and the Coalition for Whole Health, 75 Presentation by Mr. Peter Thomas, Consortium for Citizens with Disabilities (CCD), 77 Presentation by Dr. Gary Ulicny, The Shepherd Center, 78 Presentation by Ms. Marty Ford, The Arc and United Cerebral Palsy Disability Policy Collaboration, 80 References, 82 8 NON-DISCRIMINATION IN THE REQUIRED ELEMENTS FOR CONSIDERATION 85 Presentation by Ms. Sara Rosenbaum, The George Washington University, 85 References, 89 9 ADDITIONAL STAKEHOLDER PERSPECTIVES 91 Presentation by Dr. R. Sean Morrison, National Palliative Care Research Center (NPCRC), 91 Presentation by Ms. Jina Dhillon, National Health Law Program (NHeLP), 92 Presentation by Mr. Stuart Spielman, Autism Speaks, 93 Presentation by Ms. Meg Booth, Children’s Dental Health Project (CDHP), 93 Presentation by Dr. Andrew Racine, American Academy of Pediatrics, 95 Presentation by Dr. Gerald Harmon, Council on Medical Service, American Medical Association (AMA), 96 Presentation by Dr. Robert Murphy, American Society of Plastic Surgeons (ASPS), 98 Presentation by Ms. Linda Fishman, American Hospital Association (AHA), 99 Presentation by Mr. John Falardeau, American Chiropractic Association, 99 Presentation by Dr. Arnold Cohen, American Congress of Obstetricians and Gynecologists (ACOG), 100

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xiii CONTENTS Presentation by Mr. Thomas Sellers, National Coalition for Cancer Survivorship (NCCS), 100 Presentation by Mr. Troy Zimmerman, National Kidney Foundation (NKF), 101 Presentation by Mr. Richard Smith, Pharmaceutical Research and Manufacturers of America (PhRMA), 102 Presentation by Mr. Brian Gallagher, American Pharmacists Association, 104 Presentation by Mr. Bruce Wolfe, Obesity Care Continuum (OCC), 104 References, 106 10 TWO PRIVATE-SECTOR APPROACHES TO BENEFIT COVERAGE AND DESIGN 109 Presentation by Dr. Samuel Nussbaum, WellPoint, Inc., 109 Presentation by Dr. Sharon Levine, The Permanente Medical Group, 113 References, 116 11 DECIDING WHAT IS ESSENTIAL AND EVIDENCE-BASED IN TWO STATES FOR PUBLIC INSURANCE PROGRAMS 117 Presentation by Ms. Carolyn Ingram, CHCS, 117 Presentation by Dr. Jeffery Thompson, Washington State Department of Social and Health Services, 121 Presentation by Ms. Leah Hole-Curry, Washington State Health Technology Assessment (HTA) Program, 124 References, 127 12 LESSONS FROM CALIFORNIA’S BENEFIT REVIEW PROCESSES 129 Presentation by Ms. Cindy Ehnes, Ms. Maureen McKennan, and Mr. Andrew George, California Department of Managed Health Care (DMHC), 129 Presentation by Ms. Susan Philip, California Health Benefits Review Program (CHBRP), 134 Presentation by Mr. Anthony Wright, Health Access California, 137 References, 139 13 PRIORITY SETTING AND VALUE-BASED INSURANCE DESIGN 141 Presentation by Dr. Somnath Saha, Portland VA Medical Center and the Oregon HSC, 141 Presentation by Dr. Jeanene Smith, Office for Oregon Health Policy and Research, 144 Presentation by Ms. Jean Fraser, San Mateo County Health System, 146 References, 148 14 ASSESSING AFFORDABILITY AND THE POTENTIAL FOR UNDERINSURANCE 149 Presentation by Dr. Jessica Banthin, Agency for Healthcare Research and Quality (AHRQ), 149 Presentation by Ms. Cathy Schoen, The Commonwealth Fund, 151 References, 155 APPENDIXES A Patient Protection and Affordable Care Act, Section 1302 157 B Web-Based Questions for Public Input on Determination of Essential Health Benefits 161 C Stanford Model Contractual Language for Medical Necessity 163

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Boxes, Figures, and Tables Summary Box S-1 Statement of Task for the IOM Committee, 2 Chapter 1 Boxes 1-1 Essential Health Benefits Categories in ACA, 14 1-2 Statement of Task for the IOM Committee, 15 Chapter 2 Box 2-1 Characteristics of the National Compensation Survey, 24 Chapter 3 Figures 3-1 Insurance premiums can rise as state-mandated health benefits accumulate, 29 3-2 Insurers use a continuum of patient risk factors to guide consumer engagement efforts, 31 Chapter 4 Figure 4-1 The benefit categories in the ACA could vary in breadth and depth of coverage, 45 Table 4-1 The Marginal Cost of Maryland’s State-Mandated Benefits Is Less Than the Full Cost Per Benefit, 46 xv

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xvi BOXES, FIGURES, AND TABLES Chapter 6 Box 6-1 The Blue Cross and Blue Shield Association’s Technology Evaluation Center Clinical Coverage Criteria, 66 Figure 6-1 Defining benefit plans requires balancing administrative agility or consistency with the need to proactively or reactively define benefits, 60 Table 6-1 Scope of Included Benefits: ACA vs. CIGNA’s Standard Employer Plan, 62 Chapter 10 Figures 10-1 WellPoint, Inc. has various paths for reviewing benefit coverage to make medical policy decisions, 110 10-2 Prostate cancer treatments vary in cost but not necessarily in outcomes, 112 Chapter 11 Box 11-1 Criteria Used by the Washington State Health Technology Assessment Program to Make Coverage Decisions, 125 Figures 11-1 New Mexico’s traditional Medicaid has a broader array of benefits than the State Covered Insurance (SCI) Program, 120 11-2 The Washington Department of Social and Health Services uses levels of evidence to choose covered benefits, 122 11-3 The Washington Department of Social and Health Services considers comparative costs to a reference price when designing pharmaceutical benefits and payment, 123 11-4 Health Technology Assessment (HTA) program coverage decisions may vary between Washington (WA) state and private insurers, 126 Table 11-1 Traditional Medicaid, Medicaid Expansion, and Exchange Plans Vary in Population Served and Benefits Offered, 118 Chapter 12 Tables 12-1 The Covered Benefits, Mandatory Benefits, and Optional Benefits for Plans Governed by California’s Knox-Keene Act, 130 12-2 Independent Medical Reviews (IMRs) by Treatment 2008-2010, 132 12-3 Comparison of 2010 Independent Medical Review (IMR) Results, 132 12-4 Comparison of Grievance and Appeals Processes Under the Knox-Keene Act and the ACA, 134

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xvii BOXES, FIGURES, AND TABLES Chapter 13 Boxes 13-1 Example of Oregon’s Criteria for Line Item Scoring: Type II Diabetes Mellitus, 143 13-2 Hypothetical Example of Costs and Benefits Under a Silver-Level Plan, 145 Tables 13-1 Selected Elements and Rankings from the Oregon Health Services Commission’s Prioritized List for Medicaid, 142 13-2 Oregon Health Services Commission’s Prioritized Categories of Care and Associated Weights, 142 13-3 Oregon’s Proposed Value-Based Benefit Tiers Vary in Benefits and Patient Cost Sharing, 144 13-4 Oregon Expects Reduced Cost Sharing in Value-Based Tiers to Increase Utilization of Desirable Services, 146 Chapter 14 Figures 14-1 Percent of families spending 10 percent or more of family income by insurance status, 151 14-2 Underinsured and uninsured adults are at high risk of going without needed care and having financial stress due to medical debt, 152 14-3 U.S. adults (under age 65) with below-average income have high out-of-pocket health care costs even when insured, 153 Table 14-1 The Commonwealth Fund’s Analysis of Premiums as a Proportion of Income, Out-of-Pocket Maximum, and Actuarial Value for Plans Established Under the ACA, 154

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