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Value-Based Insurance Design and the Focus on Patient Cost

• Dr. Michael Koren, Dr. Mark Fendrick • Episode 372

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Dr. A. Mark Fendrick joins Dr. Michael Koren to discuss his life and legacy promoting value-based insurance design (VBID). VBID is the idea is that procedures which are neccecary should cost patients less than thsoe that are optional, and is seen in the US with many insurance plans offering 100% coverage of preventative services. Dr. Fendrick recounts his career and how he managed to get VBID language in healthcare laws under both Republican and Democratic legislatures, and that focusing on out-of-pocket patient costs has proved a beneficial strategy to getting policy passed. Dr. Fendrick closes the discussion talking about the future of healthcare in America, from the devestating loss of coverage due to changing administrations to the promise and danger of AI in the healthcare space.

Visit Dr. Fendrick at Vbidcenter.org

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Music: Storyblocks - Corporate Inspired

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Announcer:

Welcome to MedEvidence, where we help you navigate the truth behind medical research with unbiased, evidence-proven facts, hosted by cardiologist and top medical researcher, Dr. Michael Koren.

Dr. Michael Koren:

Hello, I'm Dr. Michael Koren, and I welcome you to another MedEvidence podcast. We're going to have some fun today because I have a true kindred spirit on the line, Dr. Mark Fendrick, who was actually my neighbor for a year when I lived at Vanderbilt Hall at Harvard Medical School. So Mark and I have known each other for a while. And one of the things we like to do at MedEvidence is highlight physicians who have taken a unique career pathway. And Mark, I think you fall into that category between being a radio celebrity, a world-class policy meet thought leader, and a clinician. I think you fall into that category really nicely. And I think our audience is going to love to hear your story. So tell us about it. What motivated you to do what you've done and become a professor at the University of Michigan, leading a whole division that's focused on health policy?

Dr. Mark Fendrick:

Michael, thank you so much for having me. And uh I wish my mother was still alive to hear that introduction. So she has been trying to figure out what I've been doing long before I moved to Michigan 32 years ago. So it really starts back when I was an undergrad in the classic pre-med, and you might remember in our times where it was really competitive, and professors in the early classes would say, look to your left and look to your right, only one of you will go to medical school. And I was so disappointed by that whole approach. I ended up in the second semester of my first year into a class at the Wharton School of Business at the University of Pennsylvania where I trained, which is about the healthcare system. And I didn't know then and have told hundreds, if not thousands, of students, including some yesterday, that the U.S. healthcare delivery system is the largest industry in the world. Even though we don't have Nvidia or an Apple or a Dell kind of leading the way, uh, $5 trillion is a lot of money. And I learned through those health policy classes early on that although we spend the most, as you probably said on many, many podcasts, that Americans do very poorly in terms of health outcomes. So I got very much invested in the idea of how to spend our money better. And during my times at Harvard Medical School, which I enjoyed absolutely every minute, I did spend a lot of time in the corner during my clinical rotations when I was asking my residents and attendings why they were doing things just because they could. And the fact that the evidence didn't show that maybe these were worthwhile, not understanding the harms that come with overuse of hot of certain services, not only from the physical and clinical side, but from the economic side that precluded us perhaps from doing more of the things that we wanted to do. And I, you know, trained through my residency thinking about the interface between clinical, economic, and policy outcomes, and focused the early parts of my career on trying to get us to do more of the things that the evidence is strong, whether it be preventive care, secondary care management of chronic disease, end of life care, and realized that these things were expensive. And not only that, the people who I begged them to do in my clinical office actually faced significant barriers, often financial, to get the services that were deemed to be most important to them. And around the turn of the century, my colleague Michael Chernew, then in Michigan, but now at Harvard Medical School, and I came up with this idea called value-based insurance design, where instead of making patients pay out of pocket based on the cost of the service, we actually set up a paradigm that they actually paid based on the clinical value. So instead of cheap things being cheap and expensive things being expensive, we set up this idea that maybe the good stuff, the things that the patients and their clinicians would agree on would be the most important, would be close to free or free. And the things that maybe we wanted to do, but the evidence wasn't there would be less attainable. And this is where academia and the real world meet the road. And I'd like to say that I've started every presentation since the year 2000 with a slide that says I published and I still perished. Because as you know, in academia, you don't get rewarded for going beyond getting your grant funding and publications. And I have these weird strands of DNA that really, really tugged in me in the fact that this idea of value-based insurance design, we never knew it could work. And Mike Chernew and I made this decision around 2000 to start knocking on the doors of private payers, large employers and health plans, and said, you know, why would you make people pay the same out of pocket for something I beg them to do as something that I would tell them that they don't need? And lo and behold, the idea of making people pay less for good things, as opposed to showing up in the New England Journal of Medicine, Michael, on the front page of the Wall Street Journal of Medicine in around 2001 was a story about a small company in Connecticut called Pitney Bowes, where the CEO made such a bold move that they were making high-cost branded medicines, primarily for blood pressure, heart disease, and diabetes, the same as a generic drug would cost. And I wish I could say it was one of my publications, Mike, that changed my directory of my career. But having the idea of value-based insurance design highlighted the next day and the idea had come from University of Michigan in the Wall Street Journal really did allow the idea to move forward. So if you fast forward about 10 years, most of your listeners had never heard about value-based insurance design. But I'm hopeful that either the clinicians who prescribe preventive services, or as individuals, they've received certain preventive services at no cost. For instance, your listeners who got a COVID shot, if I asked them how much it cost them, they would all say nothing. And the preventive services provision of the Affordable Care Act, which makes about 90 preventive services, including screening for cholesterol, mental health, certain cancers, are available to over 200 million Americans at no cost to them. We wrote those three paragraphs of the Affordable Care Act, and that section of the ACA was amended to make COVID shots free. So when you ask people why was your COVID shot free, you have a team from the University of Michigan who could be thanked somewhat for the idea that sometimes uh certain services should cost little or nothing, particularly those that are going to make you healthy.

Dr. Michael Koren:

Absolutely. Wow. So you gave me a lot to unpack there, Mark. So so let's fill out a few gaps in terms of that incredible starting story. So, where did you do your postgraduate training and were there any examples there that kind of led you down this path versus becoming just a subspecialist in one area or another?

Dr. Mark Fendrick:

It was very lucky, two things. One is becoming a generalist, a general internal medicine physician, as opposed to a specialist like yourself. That ties into my personality and the fact that I could never find one particular area, one disease, one career, or one organ kind of thing. And the second is that professor in that Wharton class that I met in 1979 became my second father. Bernie Bloom at the Wharton School was a PhD economist. And he felt that having a clinician to kind of help him make decisions about high and low value care was very important. And we worked together for decades, and he was instrumental in my career. So after the fabulous four years with a year interrupted, going back to Penn to learn methodologies at Harvard, I did my residency and fellowship at the University of Pennsylvania in the Robert Wood Johnson Clinical Scholars Program with a very important, undeserved sabbatical spent in Stockholm, Sweden, and Paris, France, studying European systems. As that time, I was very interested in the idea of uh government-funded healthcare and how we could actually spend our money better as they do in those systems at that time.

Dr. Michael Koren:

Interesting. So in our discussion prior to getting on, you had mentioned that you actually also work with people on the Republican side of the world of healthcare, specifically Newt Gingrich, and of course you mentioned the Affordable Care Act. So you've uh been on both sides of this equation, and that must be a little bit of a balancing act. How do you stay nonpartisan and help people get to the truth rather than the politics of things?

Dr. Mark Fendrick:

Yeah, I think the key part of this is that our focus, particularly early on, was on out-of-pocket costs in terms of what a patient would pay to fill a vial of insulin or to see you in your cardiologist's office or undergo a cardiac procedure. And one of our taglines that still persists, and when I was on Twitter, it was our most tweetable soundbite, is that Americans don't care about healthcare costs. They care about what it costs them. So you could imagine whether you're Republican or Democrat or management or labor, the idea that a patient should not have to have a bake sale to afford a drug like insulin, that if you're a type one diabetic, you might die if you don't take, really cut through very, very, very partisan times. In our earliest days, ACA and then during repeal and replace, uh, there were very few elements of that 900-page Affordable Care Act that actually resonated among all stakeholder groups. And that was the idea of out-of-pocket costs being low for essential services. So we were very fortunate to try to stay out of the fray in terms of areas where there were winners or losers and champions and people who you know opposed these initiatives. And I'll tell you now that we're, you know, 25 years, 25 years later, that that would be problematic.

Dr. Michael Koren:

So tell us a bit about the journey from the Northeast, particularly University of Pennsylvania, to Michigan, where you have been a professor for a number of years now.

Dr. Mark Fendrick:

Yeah, that's a relatively quick one. I was my whole life has been about incentives. And I my family's from Northeast Pennsylvania. I love Philadelphia and a gigantic Philadelphia sports fan. And when I was offered my position at the University of Pennsylvania, it was an incredibly low salary, for which my division chief at the time told me that the only way I could get a better offer was to look around at other places that I had no interest in. And lo and behold, I fell in love with college towns and chose a place where I could walk my kids to school and then walk to work, which was Ann Arbor, which turned out to be a terrific place in terms of the colleagues I had, and love the fact that people were interested in health, not just in the school medicine, but in other areas and that you've worked, uh, public health, public policy, social work, business, nursing. It's been a terrific place for me. And it's uh it's my colleagues that have largely contributed to our success in this area.

Dr. Michael Koren:

I see. But you've never become a Detroit sports fan. You still kept the Philadelphia blood.

Dr. Mark Fendrick:

They're my second favorite teams for sure. And if the Phillies aren't playing the Tigers or the Lions aren't playing the Eagles, I'm more than happy to cheer for the local folks. But you being an East Coast guy, you know, college sports was not a big deal in my life until I learned moved here in the early 90s. And for people who live in the Southeast, as you know where you are now and where I live, college sports reign supreme. And it it's a it's a great opportunity to spend Saturday afternoons with 110,000 of my closest friends watching Michigan play in the big house in football.

Dr. Michael Koren:

Sounds exciting. Which also brings us to your media presence and and the market that you talk to on a regular basis. And tell us a little bit about how you got into the media business.

Dr. Mark Fendrick:

Well, thank you. You know, I think you have some skills that uh most of us in clinical medicine, certainly academia, don't. It's pretty hard to explain very complicated aspects of medicine, often to an individual patient or to anyone who's been willing to listen, say to your podcast or to a media audience. And folks don't want to read our very complicated uh research publications. They want to hear how things actually pertain to them. And having being a generalist and work in lots of various areas and understanding that policymakers don't want to read a 12-page New England journal article, but want to instead want to hear everything that could be said in an elevator or on a one-pager, that's something I've worked on very hard. And the focus on how the messages could actually impact individuals, particularly now as we start 2026, where we have a significant minority of the population concerned about healthcare costs, millions of people who are paying higher premiums for their insurance, and likelihood of tens of millions of Americans potentially losing Medicaid coverage in its entirety as some of these policies move forward. So, to not only talk about how the sky is falling, but potentially explain some alternatives for people to be able to get the care they need to improve the health, I deem that to be very important. And I'm always thrilled to have an opportunity to be able to share whatever wisdom I have that may be able to make individual or population health better.

Dr. Michael Koren:

So, with that last comment in mind, do you have any advice for young physicians or other people in the healthcare industry that are looking to branch out maybe from clinical roles that may want to touch public policy issues or medical economic issues?

Dr. Mark Fendrick:

Yeah, that's a that's a really good question. I think, you know, my grandmother used to always ask me, I thought you were a doctor, how come you only see patients one day a week? And

Dr. Michael Koren:

I have very complex patients.

Dr. Mark Fendrick:

Exactly. No, how I answered her is I said, there are a lot of people, and if you know anyone who's trying to get into medical school now, who want to be clinicians and they're trained to be expert clinicians. But some of us, like you and me, and and many of our colleagues who went to medical school with are interested in actually answering some of the more original or bigger questions about how we might do certain things, whether it be through research or policy, that may have impacts that are positive, that they go beyond the one-on-one that we're accustomed to during our clinical practice. That had always driven me the big questions, thinking about systems, thinking about how, as both of us with, you know, kind of public health interests, that still, if you look at issues of sanitation and environment and and laws like smoking restrictions and seat belts have led to as large improvements in population health as many of the things we focus on in one-on-one. So it's been somewhat easy for me to defend that. But at the same time, as we both know that the day of someone being kind of good in a lot of things really doesn't fly these days. As given that there are left-handed pitchers who only pitch to right-handed batters in the seventh inning, you know, and have probably had podcast, people join your podcast who are unbelievably specialized in certain things. It is very important that you consider yourself an expert in something as opposed to a jack of all trades. So, you know, I made the decision to be a part-time clinician and a full-time research and policy person, but understanding what motivates you, what you're most passionate about, and importantly, you know, what you feel how you're contributing the best is how I advise not only young clinicians, but lots of young people in lots of fields that ultimately following your passions is probably most important. And hopefully you could find a situation like my father would describe as, you know, find the job you would do for free and have someone stupid enough to pay you for it.

Dr. Michael Koren:

I love that. I love that. Yeah. There's no doubt that finding your passion is so important and then know more about your passion than anybody else. And that's probably a ticket for success, in my view.

Dr. Mark Fendrick:

And I think that's important now, Michael, because I'm not sure how you are and whether you have children. I think I mentioned I have four kids. The statistics that come out of our peers about how a majority of our colleagues would not recommend medicine to their children. Now, our experiences have been a little different from maybe the hundreds of thousands of physicians in the U.S., but I've uh viewed my clinical time as the most humbling experience. And my one day a week I call a very big, small part of me and a very small, big part of me. It's extraordinarily humbling. I am never thought twice about my days of being clinician. I struggled with the decision about how often I would see patients, but uh have enjoyed every minute of it.

Dr. Michael Koren:

Yeah. No doubt. And I'm in the same boat. I I see patients two afternoons a week at this point. And I've thought about giving that up on many occasions, but it it's just an essential part of my identity. I don't know if you feel the same way.

Dr. Mark Fendrick:

Very much so.

Dr. Michael Koren:

Yeah. Essential, essential part. So, Mark, this has been fascinating. So tell me the one or two questions that you're super focused on right now in terms of using whatever resources you have available to you to help answer and to move the policy forward.

Dr. Mark Fendrick:

I'll talk about two that are pretty distinct. First is I I'd like to make sure that all the clinicians that listen to this tell all the clinicians they know to understand that a significant minority, and in some situations, the majority of individuals have real financial struggles following the recommendations that we make in the office. It's not just drugs, it's follow-up lab testing. It's going to get procedures and other diagnostics. And the idea of asking patients, their ability to be able to follow up with the care paths that we recommend is really important. First, is there's obviously remedies that we could put in place to allow people to get the services they need, but also understanding that financial hardship to healthcare is particularly problematic. The more we ask, I think the better we'll be able to do. So that's kind of the broad one, kind of dealing with the problem of financial non-adherence. And hopefully the value-based insurances idea will come through that more people understand that certain services they thought they had to pay for may actually be available and no out-of-pocket to them. The second is a little more specific, and I think your listeners might find interesting. Having written that part of the ACA that makes preventive services no cost, there turns out to be four initial cancer screenings that are covered, no cost for people who are insured: mammography for breast cancer, initial testing, either HPV or cervical cytology for cervical cancer, stool-based testing or colonoscopy for colon cancer, and low dose CT for lung cancer. And since we've made these interventions no cost, it shouldn't surprise you that if you make people pay less for something, they buy more of it. One of my mom's most famous quotes. But it turns out that those few people that we screen that are actually positive, they still have to pay for their follow-up care in some instances. So we have worked very hard recently, federally, Michael, to put policies in place starting 2023 that follow up colonoscopy is covered after a positive stool based test. As we record on January 12th, 12 days ago, there's now a national policy in place that follow up testing after a screening mammogram will be covered in terms of a diagnostic mammogram or biopsies that are needed. One year from today, recently announced last Monday. Policy that cervical cancer screening follow-up at will be covered at full 100% without out-of-pocket costs. And still, we don't have a policy in place for those who have a positive screening CT scan who need further testing to diagnose lung cancer. So the idea of making sure that people complete the cancer screening continuum, and this would go on to cholesterol testing, hepatitis C testing, HIV testing, mental health testing, kind of making sure that we as clinicians work with their patients to make sure that they take full advantage of the preventive services that we have offered to them, some of them at no cost, is something I'm hoping to continue our work since the passage of the ACA in 2010 to ensure that people can fully benefit from those evidence-based preventive services.

Dr. Michael Koren:

Wow. Well, that's great. Thank you for that work. It's super important work. Just to throw out a little bit of a curveball, you some clinicians might argue that for certain screening tests, there can be false positive rates that lead to a lot of anxiety, unnecessary costs, et cetera. How do you address those issues for those naysayers?

Dr. Mark Fendrick:

Yeah, they're not naysayers. They're completely right. I mean, you can't let perfect get in the way of the good. And, you know, we know that the trade-offs from making sure that we make diagnoses and not have false positives is something that everyone deals with with every diagnostic test, the trade-off between sensitivity and specificity, or positive predictive value and negative predictive value. And half your listeners are rolling their eyes going back to that three-hour class they had to take in medical school to go through those things. So the idea of certainly not missing anything, particularly

Dr. Michael Koren:

just for everybody's knowledge that doesn't know those specifics, those are ways we characterize how accurate and meaningful tests are in any particular circumstance, either based on the test characteristics.

Dr. Mark Fendrick:

They're trying to not remember. I'm joking with you now. They're trying not to remember.

Dr. Michael Koren:

No, no, I'm just saying is that people, you know, they'll they'll hear it and they'll they'll hear sensitivity and specificity and and think that we're just the trade off feeling that we're actually documentative.

Dr. Mark Fendrick:

Right. Sorry to interrupt you. it's just the trade-off on how well the test finds what it's looking for, right, but also how well it does and not missing anything. And it's really, really hard to get one right without having a little bit of leeway in the other. But yeah, these are things that we we deal with all the time. And and it's just really interesting to see our colleagues that are experts in these areas adopt certain behaviors, such as we now screened for colorectal cancer from people at age 45 to 75 as opposed to age 50 when you and I got on a residency. We've also changed how to screen for cervical cancer from yearly PAPS mirrors to now some people assigned female at birth now only need testing every five years. So, you know, that's why we need the continued funding and emphasis to continue clinical and health services search moving forward so we could serve our patients best and also pay for the services we need.

Dr. Michael Koren:

Absolutely. Absolutely. So I have two kind of final questions for you. The first one is are you accepting resumes for people that may listen to this and say, hey, I want to work for this guy?

Dr. Mark Fendrick:

Well, the the point is that this is it's uh tremendously a thing about taking it takes a village. The idea of um going beyond this idea of funding and publishing your work and actually making it reality. I, like you, Michael, are blessed and cursed with way too many ideas. But what I've realized in my you know, four decades career is implementation is really, really hard, particularly if you're involved in something that may actually lead to a what is perceived as a negative impact on a particular stakeholder, which is why you know our work in reducing unnecessary care and sometimes harmful care to be able to free up some funds to more generous coverage for the services that you would beg your patients to do, that decrement in utilization is someone's income, you know, which is why it's been so problematic for us not only to move our high-value coverage generosity, basic tenet of VBID (Value-Based Insurance Design) forward, but also the more recent idea of getting rid of the services that don't make Americans healthier to be able to pay more generously for services that are not covered well. Best example in 2026 is these really incredible GLP1 antagonist drugs that are used for unhealthy weight.

Dr. Michael Koren:

Absolutely. So my final question is maybe the most difficult one is can you predict what changes we're going to see in the US healthcare system over the next five to 10 years? And I'd be curious to see what your thoughts are. What what do you think is truly achievable or whether or not we're going to be in the same morass 10 years from now?

Dr. Mark Fendrick:

I love quoting Yogi Berra who said, predictions are dangerous, particularly those about the future. So the the good or bad news that we currently in 2026 have some policies on the books that are largely going to be detrimental to populations, particularly those that we worry the most about who are financially insecure. So we have to keep a very, very close eye on what's happening in those who get insurance through the exchanges. And we're going to see predictions of potentially million or so becoming uninsured, which you and I were accustomed with. Treating prior to the ACA, we're going to see even bigger hits to those in the Medicaid program across the country as the one big beautiful bill act gets implemented. At the same time, on the positive sides, we see our seeing breakthroughs in terms of drug price negotiation in this administration and hopefully drug prices and out-of-pocket costs for drugs will be going down. And let's look back on this podcast a few years to now, because this administration is all in on the role of artificial intelligence to produce improved clinical and economic outcomes. And while my kids call me artificially intelligent, I think we have to keep a very close eye on the role of AI in every aspect of healthcare because I do believe there's a tremendous upside. But as you and I have seen with things with great promise, there are also negative predictable and unpredictable consequences that come out of something that we roll out too quickly and don't uh provide governance to make sure they're always using it at its best.

Dr. Michael Koren:

Yeah, I was curious to see if you're going to bring AI into the into your discussion of what the future looks like. So should I be worried that I'll be replaced by an AI bot in the next five years?

Dr. Mark Fendrick:

First, me before you, but yeah, there's a possibility that we'll have a bot-driven healthcare podcast on the horizon fairly soon.

Dr. Michael Koren:

Okay. Well, I won't look forward to that today. Mark, this has been delightful. I've learned a lot. Thank you for sharing your insights. And uh thank you for being a guest on MedEvidence!

Dr. Mark Fendrick:

It's my pleasure. If any of the listeners want to learn more about our work, they could visit the VBid Center at the University of Michigan, Vbidcenter.org.

Dr. Michael Koren:

Thank you again.

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