Health Insurance Benefits Should Be Equitable, Not Necessarily Equal

By Betsy Q. Cliff, Michael Rozier, and A. Mark Fendrick
Health Affairs Blog, May 22, 2017

As policy makers grapple with potentially undoing or modifying the largest expansion of health insurance in a generation, the cost and generosity of benefits hold center stage. Traditional underpinnings of insurance plans — premiums, deductibles, copayments, and coinsurance — frequently create barriers to the optimal use of these plans by consumers. They also can exacerbate inequities in health care, by inhibiting the use of services known to benefit health. Novel approaches to insurance plan design to produce a more equitable and efficient distribution of health care expenditures are warranted.

Following the principle of equality, insurance benefit designs traditionally have offered the same benefit structure to all enrollees. Consumer cost sharing at the point of service is typically uniform regardless of need or potential clinical benefit — often it’s based on the acquisition cost. This one-size-fits-all mentality seems like a great idea on the surface but can create deeply unfair outcomes.

Instead, we should be designing insurance coverage in a way that provides access to care for people who need it, when they need it. That requires a subtle but important shift from equal access to equitable access. The first approach treats all people, regardless of clinical need, the same. The second recognizes that clinical need is an essential factor in determining where to direct resources and does not apologize for treating people with different needs differently.

A feasible and effective approach to better aligning expenditures with patient-centered outcomes is value-based insurance design (VBID). VBID structures consumer cost sharing around the idea of clinical nuance, which recognizes that the value of medical services depends on who receives it, who provides it, and where it is provided. This nuanced strategy supports the goals of equity by reducing financial barriers to specific services for targeted populations who need them most. This approach can also be used to deter the use of services when there is low or no expected clinical benefit to the patient.

Equity Versus Equality

The concept of equity is most often applied to health outcomes, in terms of addressing the burden of disease borne by one group compared to another. The solution to these inequities often involves assessing the distribution of health determinants and allocating resources accordingly.

Equity is also embedded in the financing of our health system. For example, Medicaid Disproportionate Share Hospital payments follow the principle of equity rather than equality: Health care organizations that bear the greatest share of uninsured or underinsured patients receive the largest share of funds from this program.

In most situations, a fair health care system ought to concern itself more with equity than equality. If people responded identically to, and had equal need for, clinical services, then access to those services should be equal. Since this is clearly not the case, it makes sense to discriminate based on the likelihood of clinical benefit. In other words, we should not let the potential negative effects of “bad” discrimination (for instance, failing to prescribe a drug based on a person’s racial or sexual identity) obscure the potential advantages of “good” discrimination, which would make it easier for some groups to obtain a service based on clinical need. Equity is premised on the idea that some types of discrimination — treating unequals unequally — is not only good but also necessary.

In particular, tailoring insurance benefits in this way allows individuals to access the best care for their clinical situation. To help ameliorate disparities, patients who are in the most need and services shown to have the most benefit should be supported by their insurance coverage at the most generous levels.

Ensuring Access Through Equitable Benefits

Allowing benefit programs to adapt to those who are most likely to benefit from care could allow physicians to better tailor treatment to each patient and allow patients to better respond to evidence-based recommendations. Using VBID promotes this goal in three distinct ways.

First, VBID reduces cost sharing for specific services that are shown to have the highest clinical benefit.

Second, VBID enhances benefits for specific patient populations.

Third, whereas traditional benefit designs can keep people from accessing innovative medications due to higher cost, VBID can help tailor cost sharing to the specific clinical circumstance.

Coverage arrangements in most insurance plans are designed under principles of equality rather than equity. To fully realize the benefits of medical advances, ensure access for those who could benefit most, and enhance the efficiency of our health care expenditures, we need to change this paradigm. Equitable benefit design recognizes that many chronic conditions often require tailored therapies for achieving results and allows for discrimination based on clinical need. Better health outcomes, especially for those most in need, require us to apply principles of equity in all aspects of our health care system, including benefit design.…

The concepts of equitable and equal, as applied to health care, are certainly crucial. It is imperative that health care and the financing of it be equitable – fair – but it does not necessarily have to be equal. This article discusses these concepts in regard to value-based insurance design (VBID), appropriately reflecting the biases of a University of Michigan health management and policy professor (and a partner in V-BID Health), A. Mark Fendrick, and two of his graduate students.

It is clear that our fragmented, multi-payer health care system is neither equitable nor equal. Because of the great variety of health care financing systems in the United States, or lack thereof, people certainly do not have equal access to health care services and products. Nor is the system equitable since some are served very well when in need, and others are served poorly, if at all. There is an inherent unfairness in having impaired access to the most expensive health care system in the world.

The authors recognize that insurance design contributes to these inequities. They suggest that they could be diminished by redesigning benefits so that they are value-based. But they limit their considerations by adhering to the ideology of consumer-directed health care in which patients share in the costs of health care services as they are accessed (deductibles, copayments, coinsurance, tiering of benefits, penalties for out-of-network care, etc.). Thus their emphasis is on insurance design rather than on more direct financing of essential health care services.

This approach perpetuates and adds to the complexity and waste of our uniquely American health care financing system that is weighted down by profound administrative excesses. Tweaking benefits within an individual plan certainly does not make the benefits equal to those in a multitude of other private and public plans. Even if value-based tweaks were adopted by many other plans and programs, the overall impact on health care would be almost infinitesimal compared to the great needs we have in health care reform.

Much more important than not creating equality, VBID also would have too small of an impact on health care equity. Jiggering benefits would not begin to address the deficiencies that the uninsured and underinsured face, perpetuating our profound unfairness in health care access and affordability.

So let’s set private insurance plans aside and look at these concepts in the single payer model of health care financing. How do you make the system equitable – fair? You make it accessible and affordable for everyone. Central planning and budgeting of capital improvements ensures that health care facilities and professionals are as available as the logistics and resources would allow.

Affordability? Considering the profound inequality in income and wealth and the very high costs of health care, payment into the common risk pool must be based on ability to pay if financing of the system is to be equitable. This is accomplished through progressive tax policies. There could not be a more ethical example on why our health care system must be equitable, but not necessarily equal. An equitable system would be designed to make sure that essential health care benefits are available to all, and thus equal (though benefits that should not be funded by a public system would not be equal), but the financing, to be equitable, must not be equal.

We can forget about the value-based benefit tweaks for private consumer-directed health plans. We need real fixes in our health care system that are universally equitable.