Induced utilization matters, in theory, but it had little effect, in fact, on the Union County study.
In a prior post, I suggested that Milliman’s use of downstream claims data in assessing utilization in Union County’s employee health plans may have been distorted in favor of DPC because that downstream data had not been adjusted to reflect the effects of the County’s cost-sharing design on utilization.
In a footnote to a recent comment on a Milliman web forum, two Milliman actuaries addressed similar concerns for the first time.
In addition to increasing an employer’s share of costs, benefit changes can also affect how much care members utilize. This affect (sic) is commonly referred to by actuaries as induced utilization, and should be considered by employers when structuring DPC options and by those evaluating the impacts of DPC. For our case study, the benefit design under the DPC option was slightly richer in aggregate than the PPO option, meaning that based on benefit design differences alone, members would be expected to use slightly more services in aggregate when enrolled in the DPC option than when enrolled in the PPO option. This is due to the employer waiving cost sharing for primary care services as well as the medical deductible for all services under the DPC option. Since the difference was relatively small, we conservatively did not apply an induced utilization adjustment in our estimates. If we had, the reduction in demand corresponding to enrollment in the DPC option would have been slightly greater.[Emphasis supplied.]What our study says about Direct Primary Care
I thank Milliman for putting a proper actuarial name on my concerns. I am not an actuary.
When I first saw this, I took issue, suggesting that certain differences in the details of the two plans might matter if the whole thing was looked at with sufficient granularity.
I since learned how to deploy the CMS AV calculator and CMS rules on induced utilization adjustment for risk transfer to get the granularity I sought.
Milliman turned out to be correct. The induced utilization adjustment would be about about 0.2% in favor of the DPC.
If you want an example of induced utilization large enough to warrant an adjustment of over 5% against a DPC provider, consider the Nextera SVVSD clinic — where the non-DPC cohorts gets a $750 HRA unavailable to DPC members, while paying only 10% co insurance versus 20% for the DPC members. Quite apart from generating a huge selection bias that pushes the sick away from DPC, the difference in plans means that non-DPC all members, including healthy family members who were merely brought along so one member could have the richer plan, find themselves in an easy space for health care consumption.