Altarum’s MESA Turns High-Deductible Coverage on its Head

Over the last 20 years, managed care companies have run a lot of ideas up the flagpole. All too often, however, the effects were unforeseen. Two decades ago, capitated HMOs became the best thing ever to happen to PPOs. Over the last decade, high-deductible health plans (HDHPs) have stopped countless people from visiting the doctor—whether they needed care or not. More recently, the implementation of tiered networks, designed to steer people to higher-value providers, has prompted “widespread confusion among consumers and providers, and—in some cases—a severe backlash,” according to a PWC report.

Bloom off the HDHP rose

Enrollment in high-deductible health plans as a share of all employer-sponsored coverage peaked in 2016

Source: Kaiser Family Foundation and Health Research & Educational Trust, Employer Health Benefits 2017 Annual Survey

Is it possible for any one benefit design to rally everyone around today’s ideas about value? The folks at the Altarum Institute think so, and we’re about to see how. Later this year, Altarum expects to announce that a well-known self-funded employer will pilot its Medical Episode Spending Allowance benefit model, or MESA.

The idea behind MESA is to shift market share to high-value providers by removing disincentives for seeking care and by injecting a new brand of consumerism into benefit design. The so-called “referenced benefit” model, says Doug Emery, director of benefit solutions at Altarum’s Center for Value in Health Care, matches benefits with the value of the care. “People deserve that. They don’t get that right now.”

How it works

The MESA design turns the HDHP concept upside down. Instead of an up-front deductible, MESA offers market-specific, risk-adjusted allowances for episodes of care. The allowances available to any one member depend on which episodes a payer or employer choose. They may be for common elective procedures with predictable outcomes, such as total knee replacement, or for the care of chronic conditions, such as diabetes—or both. The allowance kicks in immediately, and the deductible doesn’t apply until the allowance runs out—removing one well-known disincentive for seeking care.

The consumerism aspect begins even before the start of an episode. Using her MESA engagement tools, a member can see which providers in the region have accepted bundled payment for the episode, which charge fee for service, and how the differences compare with her allowance. Say, for instance, the member’s allowance for a knee replacement is $30,000 with a $3,000 deductible. If she chooses Dr. Murcer, who has contracted to accept $33,000 for the episode, then she’ll be on the hook for the $3,000 that exceeds her allowance. If Dr. Holtzman is contracted for $28,000, then getting care from Dr. Holtzman keeps her under budget. What’s more, she could pocket the $2,000 difference if she follows through on Dr. Holtzman’s recommended follow-up care regimen—a nice engagement incentive.

But savvy shoppers know that price isn’t everything, and MESA taps this aspect of consumerism as well. Each provider is given a quality rating—a letter grade based on potentially avoidable complications and other indicators, as traced through claims data. Dr. Holtzman may be cheaper, but if he has a B-minus rating and Doctor Murcer’s an A-plus, then our member has an important choice to make.

Emery thinks the MESA benefit design has intuitive appeal because people tend to view and experience medical care as discrete episodes. “If I have degenerative hip disease and I need a total hip [replacement], then I understand that’s a process. It starts and ends with some sort of goal and conclusion,” he says. “But the system doesn’t respond that way. You have multiple people touching the patient, with multiple bills, and it’s not a defined product.”

Two other components of the MESA design wrap around the episode allowances: an opt-in aspect that covers prevention and routine sick care, and a wellness program designed to encourage patient engagement. There is no out-of-pocket cost to the member for ACA-mandated preventive benefits, and the member receives a small allowance—$375, more or less, depending on the market—to cover routine sick care. In the wellness component, a patient and her PCP set health goals for the year, and reaching these benchmarks makes her eligible for financial rewards, such as credit toward her employee contribution for her coverage.

Benefits catch up with payment

For years, François de Brantes and Emery worked together—first at the Healthcare Incentives Improvement Institute (HCI3) and then at Altarum after HCI3 merged with Altarum—to solve the conundrums MESA confronts. De Brantes—who referred to benefit design as the “new frontier of value-based payment” at an event last year celebrating the 50th anniversary of the Leonard Davis Institute of Health Economics—tells Managed Care that the concepts that drive MESA align benefits with today’s alternative payment models.

“It allows you to practice population health management—that is, to reach out to your patients,” says de Brantes, who was dismissed by Altarum last month after differences of opinion about Altarum’s organizational structure and strategy and is now an independent consultant (see “Occam’s Razor, Health Care Costs, and Insurance Coverage”). “Get them back into your office so they’re not out there as free-range chickens, but so that you’re monitoring and helping them with the management of those conditions. That’s what we want the delivery system to do.”

Most of today’s benefit designs work at cross-purposes with alternative payment models, says de Brantes. “You’ve got the patient who has a high-deductible health plan who says, ‘Wait, why do I need to come back and see you? It’s going to cost me $150 or $200. I feel fine.’ Yes, you’re feeling fine, but if you’re not being monitored or supported and your care isn’t being coordinated, you may very well end up in the operating room.”

“I think we’re experiencing a little bit of a backlash” to the HDHP movement, says Mike Thompson, of the National Alliance of Healthcare Purchaser Coalitions.

Stories abound about how HDHPs have missed the mark (see “The Broken Promises of HDHPs,” below), but the most compelling may be those about the poor outcomes that result from sharp utilization decreases among low-wage workers enrolled in HDHPs. Those studies have sensitized employers about the limitations of high-deductible health plans, says Mike Thompson, president and CEO of the National Alliance of Healthcare Purchaser Coalitions.

“In spite of that, there have been many more employers that have moved toward total replacement with high-deductible health plans,” Thompson adds, “and I think we’re experiencing a little bit of a backlash to that movement.”

That backlash may have halted the forward march of the HDHP. According to the Kaiser Family Foundation and Health Research & Education Trust, the percentage of employer-sponsored beneficiaries enrolled in HDHPs dropped last year for the first time since Kaiser and HRET began tracking HDHP enrollment in 2006 (see “Bloom off the HDHP Rose”).

At some point, someone is going to have to pay some costs associated with “passive plans that give people a pass for imprudent behavior,” says Doug Emery, of Altarum.

Nothing passive about it

An enrollee who wants to reap the benefits of a MESA plan can expect to do his share of the lifting. The concept of a budget, the price and quality tools to help manage care within, and the prospect of getting money back means employees will have to pay attention to managing their health care like never before. Consider it an antidote to “passive plans that employers and others have put out there that give people a pass for imprudent behavior,” as Emery calls them.

Yet low health-coverage literacy has been a consistent problem in the managed care era. In a UnitedHealthcare survey last year, only 9% of Americans knew the meaning of all four of these terms: premium, deductible, out-of-pocket maximum, and coinsurance.

No doubt, a certain share of MESA enrollees will need help thinking through their choices. Emery concedes that plans and employers offering the MESA package are going to have to up their concierge game. De Brantes says the consistent reaction he’s gotten about MESA is “boy, what a great idea—and this is going to be challenging.”

And not just for enrollees, but for insurers and employers as well. Health plans and third-party administrators will need sophisticated software systems in place to help them manage allowances, bundles, benefits, and wellness rewards all at once. Plan sponsors will need to change the way their HR departments communicate with employees to build trust and help them take advantage of their benefits.

Challenging, but doable, says Thompson. In disseminating information about MESA to his purchaser coalition members, Thompson is optimistic that MESA could catch on, particularly with plan sponsors who have seen “consumer-directed” plan designs work against them.

“I remember when managed care first launched in the mid ’80s, Allied Signal and Southwestern Bell launched a national managed care platform,” Thompson recalls. Allied faced the prospect of a 39% increase in health insurance premiums in 1987, and the Baby Bell had grown tired of year-over-year cost increases of 20%. It took less than five years, he says, “for half of industry to have the same thing.”

MESA has the same potential to catch fire, says Thompson, but the issues are, “is it directionally correct? And can we learn from those early adopters?”

Collision course with history

De Brantes is hopeful that eliminating the inherent conflict between alternative payment models and HDHP benefit design can prevent a repeat of a different kind of history. Go back to the last time the “whole system blew up,” he says—when HMO capitated contracts incentivized providers to withhold care.

“On the flip side, to encourage patients to enroll in HMOs that had those capitated contracts, you gave them rich benefits with a $5 all-you-can-eat buffet,” he says. “So, you’re a patient going into that system thinking, ‘It’s only five bucks—yeah, I’m going to take the MRI and give me a CT scan, and I’ll take a couple of those lab tests—why not?’ But the doctor says, ‘Wait! First of all, you don’t need that stuff. And second, I’m going to get slaughtered on my capitated contract.’ You can look at that [conflict] and say, ‘That was pretty stupid.’”

And yet, he says, “we’re going down the exact same path” with HDHPs, creating tensions between patients who now want to avoid care and providers who are incentivized to give it. Those who ignore history, he warns, are bound to repeat it.