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Realizing the Promise of Value-based Purchasing

The Role of the Consumer


Dennis Scanlon, Ph.D., Assistant Professor, Department of Health Policy and Administration, Pennsylvania State University, University Park, PA.

Consumers are an important consideration in value-based purchasing efforts. To be effective, public programs must be responsive to the needs of their beneficiaries. The theory behind a competitive health care market assumes that informed consumers can drive plans to compete on quality in addition to price, effectively eliminating low quality providers from the market.

Dennis Scanlon addressed this assumption by examining the types of information consumers say they want to assist them in choosing a health plan, and by presenting the research on the actual impact of consumer information and education efforts on consumer decisionmaking.

Consumers differ in many respects—from the type of coverage they have (e.g., Medicare, Medicaid, State employee benefits programs) to their ability to understand information provided to them about their health care. The literature suggests that despite these differences, in general, consumers are interested in information on the following:

  • Program eligibility—what they're eligible for and how they can enroll in public programs.
  • Price and cost (e.g., copayments, costs once they're enrolled).
  • What benefits are covered (e.g., dental care, vision, pharmaceuticals).
  • Access and use information—which provider they can receive care from, whether a primary care physician is required, etc.
  • Quality.

Purchasers have taken a variety of approaches to provide information and educate consumers about the choices they face. These have included:

  • Case managers, enrollment counselors, and public service announcements to discuss program eligibility.
  • Paper brochures and computer decision aid tools to educate about price, cost, and covered benefits.
  • Report cards to address access, use, and quality.

Report cards are structured, printed documents that provide consumers comparative information about the performance of health plans or providers. They may focus broadly on overall quality of care or be specific to a condition or type of service (e.g., preventive services).

The competitive market theory states that report cards should empower consumers to influence quality of care. Yet research indicates that, to date, they have not necessarily had a significant impact on consumer decisionmaking. There are several reasons for this:

  • Out-of-pocket premiums and other costs influence consumers' choice of care more than information about the quality of plans and providers.
  • Consumers often rely upon anecdotal information, such as personal experience and opinions of family, when choosing plans and providers more than they rely upon formal information provided by documents such as report cards.
  • Negative information (e.g., a poorly rated plan) that conveys a message of risk is more influential on consumers' choice of care than information that conveys a message of "gain" or potential benefit (e.g., a higher rated plan).

One relevant study in this area evaluated the effects that the provision of Consumer Assessment of Health Plans Survey (CAHPS®) information had on plan choices of newly eligible enrollees in the New Jersey Medicaid Program. Half of the enrollees were mailed a report containing CAHPS® data for different plans, and half were not. A follow-up evaluation survey revealed that only 49 percent of the enrollees who received the report remembered it, although there was a slight tendency in those who had looked at the CAHPS® report to enroll in higher rated plans.

These results lead to many unanswered questions:

  • Why haven't report card efforts been successful in terms of changing enrollment?

    Individuals are not yet accustomed to being health care consumers, and that dissemination of report cards does not guarantee their use by consumers. The more familiarity consumers have with comparative plan information, the more impact this may have on their enrollment decisions.

  • Are report cards still worthwhile?

    Report cards might have more of an effect consumers' choice of plans and providers if:

    1. They were presented to a larger number of consumers.
    2. More time was taken to educate consumers about what the findings mean.

    Report cards may also be useful in enhancing purchasers' ability to monitor and influence quality of care.

  • Do plans respond to performance evaluations regardless of consumer or purchaser response?

    Dr. Scanlon's research finds that plans are beginning to use performance evaluations to identify problem areas and to initiate quality improvement and cost savings, which may benefit plans, purchasers, and consumers alike.

These questions and the research done in this area hold several implications for State health policymakers who are considering using report cards in their value-based purchasing efforts. Among these are:

  • It is premature to conclude that report cards are ineffective, though they are costly and their benefits are uncertain. Current evidence reflects only the earliest efforts at providing them to consumers. Future initiatives may demonstrate success.
  • There may be more efficient means to ensure quality than relying on consumer enrollment (e.g., regulation, purchaser influence).
  • Improved report card design and dissemination may lead to greater use, especially if information campaigns focus on issues other than quality.


Hibbard JH, Harris-Kojetin L, Mullin P, et al. Increasing the Impact of Health Plan Report Cards by Addressing Consumers' Concerns. Health Affairs 2000; 19(5):138-43.

Marshall MN, Shekelle PG, Leatherman S, et al. The Public Release of Performance Data: What Do We Expect to Gain? A Review of the Evidence. Journal of the American Medical Association 2000; 283(14):1866-74.

Scanlon DP, Chernew ME. HEDIS® Measures and Managed Care Enrollment. Medical Care Research and Review 1999; 56(2):60-84.

Scanlon DP, Chernew ME. Managed Care and Performance Measurement: Implications for Insurance Markets. North Atlantic Actuarial Journal 2000; 4(2):128-38.

Scanlon DP, Chernew ME, Sheffler S, et al. Health Plan Report Cards: Exploring Differences in Plan Ratings. Journal on Quality Improvement 1998; 24(1): 5-20.

Scanlon DP, Rolph E, Darby C, et al. Are Managed Care Plans Organizing for Quality? Forthcoming in Medical Care Research and Review.

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