Insurer Spending Research Articles

Hospital Prices for Physician-Administered Drugs for Patients with Private Insurance

BackgroundHospitals can leverage their position between the ultimate buyers and sellers of drugs to retain a substantial share of insurer pharmaceutical expenditures.MethodsIn this study, we used 2020–2021 national Blue Cross Blue Shield claims data regarding patients in the United States who had drug-infusion visits for oncologic conditions, inflammatory conditions, or blood-cell deficiency disorders. Markups of the reimbursement prices were measured in terms of amounts paid by Blue Cross Blue Shield plans to hospitals and physician practices relative to the amounts paid by these providers to drug manufacturers. Acquisition-price reductions in hospital payments to drug manufacturers were measured in terms of discounts under the federal 340B Drug Pricing Program. We estimated the percentage of Blue Cross Blue Shield drug spending that was received by drug manufacturers and the percentage retained by provider organizations.ResultsThe study included 404,443 patients in the United States who had 4,727,189 drug-infusion visits. The median price markup (defined as the ratio of the reimbursement price to the acquisition price) for hospitals eligible for 340B discounts was 3.08 (interquartile range, 1.87 to 6.38). After adjustment for drug, patient, and geographic factors, price markups at hospitals eligible for 340B discounts were 6.59 times (95% confidence interval [CI], 6.02 to 7.16) as high as those in independent physician practices, and price markups at noneligible hospitals were 4.34 times (95% CI, 3.77 to 4.90) as high as those in physician practices. Hospitals eligible for 340B discounts retained 64.3% of insurer drug expenditures, whereas hospitals not eligible for 340B discounts retained 44.8% and independent physician practices retained 19.1%.ConclusionsThis study showed that hospitals imposed large price markups and retained a substantial share of total insurer spending on physician-administered drugs for patients with private insurance. The effects were especially large for hospitals eligible for discounts under the federal 340B Drug Pricing Program on acquisition costs paid to manufacturers. (Funded by Arnold Ventures and the National Institute for Health Care Management.)

Outcome-Based Reimbursement: The Solution to High Drug Spending?

Problem definition: The continuously soaring prices of new drugs and their uncertain effectiveness in clinical practice have put substantial risks on insurers/payers. To induce insurer coverage of their new drugs, manufacturers start to propose an innovative outcome-based reimbursement (OBR) scheme under which manufacturers refund insurers (and possibly patients) if the drugs fail to achieve a prespecified treatment target. We investigate the impact of OBR on insurers, manufacturers, and patients. Academic/practical relevance: Although OBR sounds intuitively appealing, its true impact is under much debate and depends particularly on the design of OBR. Our study sheds light on the optimal design of OBR and the debate around OBR, considering key trade-offs and key elements not covered in prior literature. Methodology: We develop a Stackelberg game under which the manufacturer designs a rebate scheme for its drug, either non-OBR or OBR, considering the trade-off between a favorable formulary position and the rebate provided. The insurer subsequently determines its formulary for the drug as well as other alternative drugs within the same disease category considering the trade-off between its spending and patient health benefits. Using data on 14 drugs treating a common disease, hyperlipidemia, we estimate through a multinomial logit model the demand of the 14 drugs and conduct counterfactual analyses on the impact of OBR. Results: Under the optimal OBR, the manufacturer lowers the insurer’s risk but inflates the wholesale price (hence, may not reduce insurer spending). OBR also induces a better formulary position for the manufacturer, which, hence, improves patient access to new drugs. Further, rebates to the insurer and patients affect demand through different mechanisms. Including patient rebates in OBR lowers patient expenses and increases drug demand but further increases insurer spending. Managerial implications: We demonstrate the structure of an optimal formulary and its application in practice. We caution insurers/payers who are seeking OBR to reduce their spending.

US Insurer Spending on Ivermectin Prescriptions for COVID-19

US Insurer Spending on Ivermectin Prescriptions for COVID-19

Understanding the distributional impacts of health insurance reform: Evidence from a consumer cost-sharing program.

We examine the heterogeneous effects of reference pricing, a health insurance reform introduced by the California Public Employees' Retirement System (CalPERS), on the distribution of spending by patients and insurers. Using medical claims data for CalPERS and a comparison group not subject to reference pricing, we use the changes-in-changes approach to estimate the quantile treatment effects of the program across different medical procedures. We find that the quantile treatment effects vary across the patient spending distributions, with a range of positive and negative estimates of the QTE, depending on the medical procedure considered. However, across all procedures, the insurer's spending distributions tend to shift left, with the largest reductions occurring in the right-tail of the spending distributions. These effects are not captured by mean estimates but have important policy implications.

Differences in Cancer Care Expenditures and Utilization for Surgery by Hospital Type Among Patients With Private Insurance

With rising expenditures on cancer care outpacing other sectors of the US health system, national attention has focused on insurer spending, particularly for patients with private insurance, for whom price transparency has historically been lacking. The type of hospital at which cancer care is delivered may be an important factor associated with insurer spending for patients with private insurance. To examine differences in spending and utilization for patients with private insurance undergoing common cancer surgery at National Cancer Institute (NCI) centers vs community hospitals. This retrospective cross-sectional study included adult patients with an incident diagnosis of breast, colon, or lung cancer who underwent cancer-directed surgery from 2011 to 2014. Mean risk-adjusted spending and utilization outcomes were examined for each hospital type using multilevel generalized linear mixed-effects models, adjusting for patient, hospital, and region characteristics. Data were collected from the Health Care Cost Institute's national multipayer commercial claims data set, which encompasses claims paid by 3 of the 5 largest commercial health insurers in the United States (ie, Aetna, Humana, and UnitedHealthcare). Data analyses were conducted from February 2018 to February 2019. Hospital type at which cancer surgery was performed: NCI, non-NCI academic, or community. Spending outcomes were surgery-specific insurer prices paid and 90-day postdischarge payments. Utilization outcomes were length of stay (LOS), emergency department (ED) use, and hospital readmission within 90 days of discharge. The study included 66 878 patients (51 569 [77.1%] women; 31 585 [47.2%] aged ≥65 years) with incident breast (35 788 [53.5%]), colon (21 378 [32.0%]), or lung (9712 [14.5%]) cancer undergoing cancer surgery at 2995 hospitals (5522 [8.3%] at NCI centers; 10 917 [16.3%] at non-NCI academic hospitals; 50 439 [75.4%] at community hospitals). Treatment at NCI centers was associated with higher surgery-specific insurer prices paid compared with community hospitals ($18 526 [95% CI, $16 650-$20 403] vs $14 772 [95% CI, $14 339-$15 204]; difference, $3755 [95% CI, $1661-$5849]; P < .001) and 90-day postdischarge payments ($47 035 [95% CI, $43 289-$50 781] vs $41 291 [95% CI, $40 350-$42 231]; difference, $5744 [95% CI, $1659-9829]; P = .006). There were no significant differences in LOS, ED use, or hospital readmission within 90 days of discharge. In this cross-sectional study, surgery at NCI centers vs community hospitals was associated with higher insurer spending for a surgical episode without differences in care utilization among patients with private insurance undergoing cancer surgery. A better understanding of the factors associated with prices and spending at NCI cancer centers is needed.

A Causal Estimate of Long-Term Health Care Spending Attributable to Body Mass Index Among Adults

While high body mass index (BMI) is believed to be a major driver of poor health, there is little evidence about whether it leads to higher health care spending. Understanding the causal contribution of BMI to health care spending is necessary to estimate the returns to investment in weight loss efforts. We exploit genetic variation in BMI across siblings as a natural experiment to estimate the impact of BMI on cumulative third party and out-of-pocket health care spending among adults using the Panel Study of Income Dynamics data from 1999 through 2011. We estimate a two-stage residual inclusion model with a generalized linear model. We find a $611.60 increase in cumulative insurer spending for each one-unit increase in BMI. This amounts to $130.49 in mean annual spending, and is two times higher than the non-causal estimate. We find no difference in out-of-pocket spending by BMI. These findings suggest that having a higher BMI in young/middle adulthood leads to significantly higher insurer health expenditures over the life course, which can help to inform public and private insurer policies on BMI reduction and control.

New post‐ACA insurance data highlights health insurer spending on health care quality

AbstractFollowing the Patient Protection and Affordable Care Act (ACA), annual financial reports by commercial health insurers include more detailed information on a Supplemental Health Care Exhibit. In this new exhibit, insurers illustrate spending on the provision of medical services and associated expenses. These expenses, which were commonly reported as “claims adjustment” and “general administrative” expenses, can now be allocated to several new categories of expenses associated with combatting fraud and improving patient health care quality. This article illustrates that quality improvement expenses have increased significantly in the individual, small group, and large group markets following implementation of the ACA. Of the five types of quality expenses reported, the greatest proportion of spending has been toward the improvement of health outcomes and the most pronounced increase from 2011 to 2017 has been spending toward increased wellness and health promotion activities, which include activities such as wellness assessments and coaching programs for patients with chronic diseases. Given that the ACA was designed not only to broaden access to health insurance but also to improve health, analysis of the allocations to various types of quality improvement activities highlights the private market's contribution to improving the health of the US population.

Salience, Myopia, and Complex Dynamic Incentives: Evidence from Medicare Part D

The standard Medicare Part D drug insurance contract is non-linear—with reduced subsidies in a coverage gap—resulting in a dynamic purchase problem. We consider enrolees who arrived near the gap early in the year and show that they should expect to enter the gap with high probability, implying that, under a benchmark model with neoclassical preferences, the gap should impact them very little. We find that these enrolees have flat spending in a period before the doughnut hole and a large spending drop in the gap, providing evidence against the benchmark model. We structurally estimate behavioural dynamic drug purchase models and find that a price salience model where enrolees do not incorporate future prices into their decision-making at all fits the data best. For a nationally representative sample, full price salience would decrease enrolee spending by 31%. Entirely eliminating the gap would increase insurer spending 27%, compared to 7% for generic-drug-only gap coverage.

Insurance Mandates and Out-of-Pocket Spending for Children With Autism Spectrum Disorder.

The health care costs associated with treating autism spectrum disorder (ASD) in children can be substantial. State-level mandates that require insurers to cover ASD-specific services may lessen the financial burden families face by shifting health care spending to insurers. We estimated the effects of ASD mandates on out-of-pocket spending, insurer spending, and the share of total spending paid out of pocket for ASD-specific services. We used administrative claims data from 2008 to 2012 from 3 commercial insurers, and took a difference-in-differences approach in which children who were subject to mandates were compared with children who were not. Because mandates have heterogeneous effects based on the extent of children's service use, we performed subsample analyses by calculating quintiles based on average monthly total spending on ASD-specific services. The sample included 106 977 children with ASD across 50 states. Mandates increased out-of-pocket spending but decreased the share of spending paid out of pocket for ASD-specific services on average. The effects were driven largely by children in the highest-spending quintile, who experienced an average increase of $35 per month in out-of-pocket spending (P < .001) and a 4 percentage point decline in the share of spending paid out of pocket (P < .001). ASD mandates shifted health care spending for ASD-specific services from families to insurers. However, families in the highest-spending quintile still spent an average of >$200 per month out of pocket on these services. To help ease their financial burden, policies in which children with higher service use are targeted may be warranted.

The Association Between Provider Price and Complication Rates for Outpatient Surgical Services.

Wide variations exist in price and quality for health-care services, but the link between price and quality remains uncertain. This paper used claims data from a large commercially insured population to assess the association between both procedure- and provider-level prices and complication rates for three common outpatient surgical services. This is a retrospective cohort study. The study used medical claims data from commercial health plans between 2009 and 2013 for three outpatient surgical services-joint arthroscopy, cataract surgery, and colonoscopy. For each procedure, price was assessed as the sum of patient, employer, and insurer spending. Complications were identified using existing algorithms specific to each service. Multivariate regressions were used to risk-adjust prices and complication rates. Provider-level price and complication rates were compared by calculating standardized differences that compared provider risk-adjusted price and complication rates with other providers within the same geographic market. The association between provider-level risk-adjusted price and complication rates was estimated using a linear regression. Across the three services, there was an inverse association between both procedure- and provider-level prices and complication rates. For joint arthroscopy, cataract surgery, and colonoscopy, a one standard deviation increase in procedure-level price was associated with 1.06 (95% CI 1.05-1.08), 1.14 (95% CI 1.11-1.16), and 1.07 (95% CI 1.06-1.07) odds increases in the rate of procedural complications, respectively. A one standard deviation increase in risk-adjusted provider price was associated with 0.09 (95% CI 0.07 to 0.11), 0.02 (95% CI 0.003 to 0.05), and 0.32 (95% CI 0.29 to 0.34) standard deviation increases in the rate of provider risk-adjusted complication rates, respectively. Results may be due to unobserved factors. Only three surgical services were examined, and the results may not generalize to other services and procedures. Quality measurements did not include patient satisfaction or experience measures. For three common outpatient surgical services, procedure- and provider-level prices are associated with modest increased rates of complication rates.

Primary care clinical practice guidelines in South Africa: qualitative study exploring perspectives of national stakeholders

BackgroundClinical practice guidelines (CPGs) are common tools in policy and clinical practice informing clinical decisions at the bedside, governance of health facilities, health insurer and government spending, and patient choices. South Africa’s health sector is transitioning to a national health insurance system, aiming to build on other primary health care initiatives to transform the previously segregated, inequitable services. Within these plans CPGs are an integral tool for delivering standardised and cost effective care. Currently, there is no accepted standard approach to developing, adapting or implementing CPGs efficiently or effectively in South Africa. We explored the current players; drivers; and the context and processes of primary care CPG development from the perspective of stakeholders operating at national level.MethodsWe used a qualitative approach. Sampling was initially purposeful, followed by snowballing and further sampling to reach representivity of primary care service providers. Individual in-depth interviews were recorded and transcribed verbatim. We used thematic content analysis to analyse the data.ResultsWe conducted 37 in-depth interviews from June 2014–July 2015. We found CPG development and implementation were hampered by lack of human and funding resources for technical and methodological work; fragmentation between groups, and between national and provincial health sectors; and lack of agreed systems for CPG development and implementation. Some CPG contributors steadfastly work to improve processes aiming to enhance communication, use of evidence, and transparency to ensure credible guidance is produced. Many interviewed had shared values, and were driven to address inequity, however, resource gaps were perceived to create an enabling environment for commercial interests or personal agendas to drive the CPG development process.ConclusionsOur findings identified strengths and gaps in CPG development processes, and a need for national standards to guide CPG development and implementation. Based on our findings and suggestions from participants, a possible way forward would be for South Africa to have a centrally coordinated CPG unit to address these needs and aspects of fragmentation by devising processes that support collaboration, transparency and credibility across sectors and disciplines. Such an initiative will require adequate resourcing to build capacity and ensure support for the delivery of high quality CPGs for South African primary care.

Reference Pricing, Consumer Cost-Sharing, and Insurer Spending for Advanced Imaging Tests.

Fees charged for similar imaging tests often vary dramatically within the same market, leading to wide variation in insurer spending and consumer cost-sharing. Reference pricing is an insurance design that offers good coverage to patients up to a defined contribution limit but requires the patients who select high-priced facilities to pay the remainder out of pocket. To measure the association between implementation of reference pricing and patient choice of facility, test prices, out-of-pocket spending, and insurer spending for advanced imaging (CT and MRI) procedures. Difference-in-differences multivariable analysis of insurance claims data. Study included 4751 employees of a national grocery chain (treatment group) and 23,428 enrollees in the nation's largest private insurance plan (comparison group) that used CT or MRI tests between 2010 and 2013. Patient choice of facility, price paid per test, patient out-of-pocket cost-sharing, and employer spending. Compared with trends in prices paid by insurance enrollees not subject to reference pricing, and after adjusting for characteristics of tests and patients, implementation of reference pricing was associated with a 12.5% (95% CI, -25.0%, 2.1%) reduction in average price paid per test by the end of the second full year of the program for CT scans and a 10.5% (95% CI, -16.9%, 3.6%) for MRIs. Out-of-pocket cost-sharing by patients declined by $71,508 (13.8%). The savings accruing to employees amounted to 45.5% of total savings from reference pricing, with the remainder accruing to the employer. Implementation of reference pricing led to reductions in payments by both employer and employees.

Association of Reference Payment for Colonoscopy With Consumer Choices, Insurer Spending, and Procedural Complications.

Regulatory limits on consumer cost sharing permit wide variation in the prices charged for screening and diagnostic tests such as colonoscopy. Employers are experimenting with reference payment initiatives that offer full insurance coverage at low-priced facilities but require substantial cost sharing if patients select high-priced alternatives. To ascertain the effect of reference payment on facility choice, insurer spending, consumer cost sharing, and procedural complications for colonoscopy. The California Public Employees' Retirement System (CalPERS) implemented reference payment in January 2012. We obtained data on 21 644 CalPERS enrollees who underwent colonoscopy in the 3 years prior to implementation and on 13 551 patients in the 2 years after implementation. Control group data were obtained on 258 616 Anthem Blue Cross enrollees who underwent colonoscopy and who were not subject to reference payment initiatives during this 5-year period. Consumer choice of facility, price paid per procedure, total insurer spending, consumer cost sharing, and procedural complications. Choices, prices, and complications were compared for CalPERS and Anthem patients before and after implementation of reference payments, using difference-in-difference multivariable regressions to adjust for patient demographic characteristics and comorbidities, procedure indications, and geographic location. Utilization of low-priced facilities for CalPERS members increased from 68.6% in 2009 to 90.5% in 2013. After adjusting for patient demographic characteristics, comorbidities, and other factors, the implementation of reference payment increased use of low-priced facilities by 17.6 percentage points (95% CI, 11.8 to 23.4; P < .001). The mean price paid for colonoscopy for the CalPERS population increased from $1587 (95% CI, $1555-$1618) in 2009 to $1716 (95% CI, $1678-$1753) in 2011 and then decreased to $1508 (95% CI, $1469-$1548) in 2013 for patients subject to reference payment. After adjustment for other relevant factors, reference payment was responsible for a 21.0% (95% CI, -26.0% to -15.6%, P < .001) reduction in the price. Reference payment was associated with a small but statistically insignificant decline in procedural complications, from 2.1% in 2009 to 2.0% in 2013 (P = .47). In the first 2 years after implementation, CalPERS saved $7.0 million (28%) on spending for the procedure. Implementation of reference payment for colonoscopy was associated with reduced spending and no change in complications.

Reference Pricing with Endogenous or Exogenous Payment Limits: Impacts on Insurer and Consumer Spending.

Reference pricing (RP) theories predict different outcomes when reference prices are fixed (exogenous) versus being a function of market prices (MPs) (endogenous). Exogenous RP results in MPs at both high-price and low-price firms converging towards the reference price from above and below, respectively. Endogenous RP results in MPs at both high-price and low-price firms decreasing, with low-price firms acting strategically to decrease the reference price in order to gain market share. We extend these models to a hospital context focusing on insurer and consumer payments. Under exogenous RP, insurer and consumer payments to low-price hospitals increase, and insurer payments to high-price hospitals decrease, but predictions regarding consumer payments are ambiguous for high-price hospitals. Under endogenous RP, insurer payments to high-price and low-price hospitals decrease, and consumer payments to low-price hospitals decrease, but predictions regarding consumer payments are ambiguous for high-price hospitals. We test these predictions with difference-in-differences specifications using 2008-2013 data on patients undergoing joint replacement. For 2years following RP implementation, insurer payments to high-price and low-price hospitals moved downward, consistent with endogenous RP. However, when the reference price was not reset to account for changes in MPs, insurer payments to low-price hospitals reverted to pre-implementation levels, consistent with exogenous RP. Copyright © 2015 John Wiley & Sons, Ltd.

The Impact of Reducing Cardiovascular Medication Copayments on Health Spending and Resource Utilization

The aim of this study was to evaluate the impact of reductions in statin and clopidogrel copayments on cardiovascular resource utilization, major coronary events, and insurer spending. Copayments are widely used to contain health spending but cause patients to reduce their use of essential cardiovascular medications. Reducing copayments for post-myocardial infarction secondary prevention has beneficial effects, but the impact of this strategy for lower risk patients and other drugs remains unclear. An evaluation was conducted of health care spending and resource use by a large self-insured employer that reduced statin copayments for patients with diabetes or vascular disease and reduced clopidogrel copayments for all patients prescribed this drug. Eligible individuals in the intervention company (n = 3,513) were compared with a control group from other companies without such a policy (n = 49,803). Analyses were performed using segmented regression models with generalized estimating equations. Lowering copayments was associated with significant reductions in rates of physician visits (relative change: statin users 0.80; 95% confidence interval [CI]: 0.57 to 0.98; clopidogrel users: 0.87; 95% CI: 0.59 to 0.96) and hospitalizations and emergency department admissions (relative change: statin users 0.90; 95% CI: 0.80 to 0.92; clopidogrel users: 0.89; 95% CI: 0.74 to 0.90) although not major coronary events. Patient out-of-pocket spending for drugs and other medical services decreased (relative change: statin users 0.79; 95% CI: 0.75 to 0.83; clopidogrel users 0.74; 95% CI: 0.66 to 0.82). Providing more generous coverage did not increase overall spending (relative change: statin users 1.03; 95% CI: 0.97 to 1.09; clopidogrel users 0.94; 95% CI: 0.87 to 1.03). Lowering copayments for statins and clopidogrel was associated with reductions in health care resource use and patient out-of-pocket spending. The policy appeared cost neutral with respect to overall health spending.

Patterns of Medication Initiation in Newly Diagnosed Diabetes Mellitus: Quality and Cost Implications

ObjectiveSix oral medication classes have been approved by the Food and Drug Administration for the treatment of type 2 diabetes. Although all of these agents effectively lower blood glucose, the evidence supporting their impact on other clinical events is variable. There also are substantial cost differences between agents. We aimed to evaluate temporal trends in the use of specific drugs for the initial management of type 2 diabetes and to estimate the economic consequences of non-recommended care. MethodsWe studied a cohort of 254,973 patients, aged 18 to 100 years, who were newly initiated on oral hypoglycemic monotherapy between January 1, 2006, and December 31, 2008, by using prescription claims data from a large pharmacy benefit manager. Linear regression models were used to assess whether medication initiation patterns changed over time. Multivariate logistic regression models were constructed to identify independent predictors of receiving initial therapy with metformin. We then measured the economic consequences of prescribing patterns by drug class for both patients and the insurer. ResultsOver the course of the study period, the proportion of patients initially treated with metformin increased from 51% to 65%, whereas those receiving sulfonylureas decreased from 26% to 18% (P<.001 for both). There was a significant decline in the use of thiazolidinediones (20.1%-8.3%, P<.001) and an increase in prescriptions for dipeptidyl peptidase-4 inhibitors (0.4%-7.3%, P<.001). Younger patients, women, and patients receiving drug benefits through Medicare were least likely to initiate treatment with metformin. Combined patient and insurer spending for patients who were initiated on alpha-glucosidase inhibitors, thiazolidinediones, meglitinides, or dipeptidyl peptidase-4 inhibitors was $677 over a 6-month period compared with $116 and $118 for patients initiated on metformin or a sulfonylurea, respectively, a cost difference of approximately $1120 annually per patient. ConclusionApproximately 35% of patients initiating an oral hypoglycemic drug did not receive recommended initial therapy with metformin. These practice patterns also have substantial implications for health care spending.