Spending Caps Research Articles

State Mandates To Cap Out-Of-Pocket Insulin Costs Are No Longer Necessary.

During the past five years, many states have imposed out-of-pocket spending caps on insulin. In most cases, these reforms have had limited impact, in part because of the limits of state authority. Meanwhile, changes at the federal level and actions by manufacturers and commercial plans have made some of the caps nonbinding. It is not surprising that efforts to measure the impact of these caps yield conflicting results.

Sociodemographic and spending characteristics of Medicare beneficiaries taking prescription drugs subject to price negotiations.

The 2022 Inflation Reduction Act authorizes Medicare to negotiate the prices of 10 drugs in 2026 and additional drugs thereafter. Understanding the sociodemographic and spending characteristics of beneficiaries taking these specific drugs could be important describing the impact of the legislation. To describe sociodemographic and spending characteristics of Medicare beneficiaries who use the 10 prescription drugs ("negotiated drugs") that will face Medicare drug price negotiations in 2026. A 20% sample of Medicare Part D beneficiaries from 2020 (n = 10,224,642) was used. Sociodemographic and spending characteristics were descriptively reported for beneficiaries taking the negotiated drugs, including subgroups by low-income subsidy (LIS) status and by drug, and for Part D beneficiaries not taking negotiated drugs. Part D beneficiaries taking a negotiated drug compared with Part D beneficiaries not taking a negotiated drug overall had similar sociodemographic characteristics, more comorbidities (3.9 vs 2.2) and higher mean [median] Medicare ($33,882 [$18,251] vs $12,366 [$3,429]) and out-of-pocket (OOP) spending ($813 [$307] vs $441 [$160]). There was variation in characteristics by LIS status. The mean age was highest among non-LIS beneficiaries taking a negotiated drug compared with LIS beneficiaries taking a negotiated drug and beneficiaries not taking a negotiated drug (76.2 vs 69.9 vs 71.4). Among beneficiaries using negotiated drugs, a higher percentage of LIS beneficiaries compared with non-LIS was female (59.7% vs 48.0%), was Black (20.9% vs 6.6%), and resided in lower-income areas (39.1% vs 20.3%). Mean [median] annual Part D OOP spending for negotiated drugs was $115 [$59] for beneficiaries with LIS and $1,475 [$1,204] for beneficiaries without LIS. There were also differences depending on which negotiated drug was used. Drugs for cancer and blood clots had the highest proportions of White users, whereas type 2 diabetes and heart failure drugs had the highest proportions of Black users and beneficiaries residing in lower-income areas. Annual Part D OOP costs were lowest for sitagliptin (LIS: $104 [$60], non-LIS: $1,391 [$1,153]) and highest for ibrutinib (LIS: $649 [$649], non-LIS: $6,449 [$6,867]). Among non-LIS beneficiaries, 24% (22% to 76%) had more than $2,000 in OOP costs. Inflation Reduction Act OOP spending caps and LIS expansion will lower prescription drug costs for beneficiaries with OOP costs exceeding $2,000 who are mostly White and live in higher-income areas, insulin users who are disproportionately Black with multiple chronic conditions, and beneficiaries with low incomes. However, these provisions will not impact the 76% of non-LIS beneficiaries using negotiated drugs who have OOP costs that are still substantial but below $2,000. Negotiations could reduce OOP costs through reduced coinsurance payments for this group, which is older and has more chronic conditions compared with beneficiaries not taking negotiated drugs. Part D plan design, spending, and utilization changes should be monitored after negotiation to determine if further solutions are needed to lower OOP costs for this group.

Comparison of Anticancer Medication Use and Spending Under US Oncology Parity Laws With and Without Out-of-Pocket Spending Caps.

By 2020, nearly all states had adopted oncology parity laws in the US, ensuring that patients in fully insured private health plans pay no more for orally administered anticancer medications (OAMs) than infused therapies. Between 2013 and mid-2017, 11 states implemented parity with out-of-pocket spending caps, which may further reduce patient out-of-pocket spending. To compare OAM uptake and out-of-pocket and health plan spending on OAMs in states with parity with and without spending caps, as well as to assess out-of-pocket spending for caps that apply predeductible vs postdeductible. This cohort study analyzed OAM users enrolled in commercial health plans offered by Aetna, Humana, and United Healthcare in the US from 2011 to 2017, aggregated by the Health Care Cost Institute, using difference-in-difference-in-differences (DDD) analysis. Data analysis was conducted between June and August 2020. Time (before vs after parity), whether the state parity law included an out-of-pocket spending cap, and whether the plan was fully insured (subject to parity) or self-funded (not subject to parity). Among states with caps, out-of-pocket spending was also compared by whether the cap was applied predeductible and postdeductible vs only postdeductible. Monthly OAM prescription fills per 100 000 enrollees, per-OAM prescription-fill out-of-pocket spending, and annual per-user health plan spending on OAMs. In this study of 23 states (11 with caps and 12 without) and 207 579 OAM prescription fills, caps were associated with a modest increase in OAM use (DDD, 7.40 [95% CI, 3.41-11.39] per 100 000 enrollees). There was no difference in mean out-of-pocket spending comparing fully insured and self-funded enrollees in states with vs without caps (DDD, -$17 [95% CI, -$57 to $24), but caps were associated with lower spending among OAM users in the 95th percentile of out-of-pocket spending by $831 (95% CI, -$871 to -$791) per OAM prescription fill. Caps applied predeductible were associated with greater out-of-pocket savings relative to caps applied only postdeductible. This included per-OAM prescription-fill savings at the 75th, 90th, and 95th percentiles. Postparity, mean annual spending on OAMs among users was $113 589 in states without caps and $102 252 in states with caps, with no differences between groups (DDD, $9799 [95% CI, -$4230 to $23 829). In this cohort study, among states adopting oncology parity laws between 2013 and 2017, mean out-of-pocket spending per OAM prescription fill and mean health plan spending among OAM users was similar in states with and without caps. However, enrollees in states with parity plus out-of-pocket caps had greater reductions in out-of-pocket spending among the highest spenders. Caps may offer improved financial protection for the highest spenders without increasing mean health plan spending on OAMs.

The Dollar or Disease Burden: Caps on Healthcare Spending May Save Money, but at What “Cost” to Patients?

ObjectivesVarious strategies to address healthcare spending and medical costs continue to be debated and implemented in the United States. To date, these efforts have failed to adequately contain the growth of healthcare cost. An alternative strategy that has elicited rising interest among policymakers is budget caps. As budget caps become more prevalent, it is important to identify which features are needed to ensure success, both in terms of cost reduction and health improvement. MethodsWe explored the impacts of different features of budget caps by comparing hypothetical service level and global budget caps across 3 annual budget cap growth strategies over a 10-year timeframe in 2005-2015 for 8 of the most commonly occurring conditions in the United States. Health was assessed by a measure of disease burden (disability-adjusted life years). ResultsThe results indicate that budget caps have the potential for creating savings but can also result in patient harm if not designed well. As a result of these findings, 5 principles were developed for designing budget caps and should guide the use of budget caps to address medical spending. ConclusionsAs public discussion grows about the use of budget caps to constrain health spending, it is critical to recognize that the budget cap design and the resulting healthcare provider behavior will determine whether there is potential harm to public health. Budget cap design should consider variability at the condition level, including patient population, improvements in health, treatment costs, and the innovations available, to both create savings and maximize patient health. In assessing the impact of healthcare spending caps on costs and disease burden, we demonstrate that budget cap design determines potential harm to public health.

Patient and Plan Spending after State Specialty-Drug Out-of-Pocket Spending Caps

BackgroundSpecialty drugs are used to treat complex or life-threatening conditions, often at high financial costs to both patients and health plans. Three states — Delaware, Louisiana, and Maryland — passed legislation to cap out-of-pocket payments for specialty drugs at $150 per prescription. A concern is that these caps could shift costs to health plans, increasing insurance premiums. Estimates of the effect of the caps on patient and health-plan spending could inform future policies.MethodsWe analyzed a sample that included 27,161 persons under 65 years of age who had rheumatoid arthritis, multiple sclerosis, hepatitis C, psoriasis, psoriatic arthritis, Crohn’s disease, or ulcerative colitis and who were in commercial health plans from 2011 through 2016 that were administered by three large nationwide insurers. The primary outcome was the change in out-of-pocket spending among specialty-drug users who were in the 95th percentile for spending on specialty drugs. Other outcomes were changes in mean out-of-pocket and health-plan spending for specialty drugs, nonspecialty drugs, and nondrug health care and utilization of specialty drugs. We compared outcomes in the three states that enacted caps with neighboring control states that did not, 3 years before and up to 3 years after enactment of the spending cap.ResultsCaps were associated with an adjusted change in out-of-pocket costs of −$351 (95% confidence interval, −554 to −148) per specialty-drug user per month, representing a 32% reduction in spending, among users in the 95th percentile of spending on specialty drugs. This finding was supported by multiple sensitivity analyses. Caps were not associated with changes in other outcomes.ConclusionsCaps for spending on specialty drugs were associated with substantial reductions in spending on specialty drugs among patients with the highest out-of-pocket costs, without detectable increases in health-plan spending, a proxy for future insurance premiums. (Funded by the Robert Wood Johnson Foundation Health Data for Action Program.)

Specialty-drug out-of-pocket spending caps reduce burden on US patients

Specialty-drug out-of-pocket spending caps reduce burden on US patients

The macroeconomic effects of the 2018 Bipartisan Budget Act

The 2018 Bipartisan Budget Act raised government spending caps by $300 billion for fiscal years 2018 and 2019. While spending does not increase immediately, private sector investment and consumption may respond ahead of an anticipated fiscal stimulus. This Economic Perspectives article assesses the strength of this mechanism based on the private sector?s expectations.

Trump budget gives last-minute reprieve to science funding

Funding for the National Science Foundation and National Institutes of Health would hold steady after Congress agrees to lift spending caps, but details are fuzzy. Funding for the National Science Foundation and National Institutes of Health would hold steady after Congress agrees to lift spending caps, but details are fuzzy.

Concerns Around Budget Impact Thresholds: Not All Drugs Are the Same.

The use of budget thresholds is a recent development in the United States (e.g., the Institute for Clinical and Economic Review drug assessments). Budget thresholds establish limits that require some type of budgetary action if exceeded. This research focused on the advisability of using product-level budget thresholds as fixed spending caps by examining whether they are likely to improve or worsen market efficiency over status quo. The aim of this study was to determine whether fixed product-level spending caps are advisable for biopharmaceuticals. We systematically examined 5-year, postlaunch revenue for drugs that launched in the United States between 2003 and 2014 using the IMS MIDAS database. For products launched between 2011 and 2014, we used historical revenue as the baseline and trended out 60 months postlaunch based on exponential smoothing. Forecasted fifth-year revenue was compared to analyst reports. Fifth-year revenue was compared against a hypothetical $904 million spending cap to determine the amount of annual spending that might require reallocation. Descriptive statistics of 5-year, postlaunch revenue and annual spending requiring reallocation were calculated. Adhering to a $904 million product-level spending cap requires that approximately one-third of new drug spending be reallocated to other goods and services that have the potential to be less cost-effective due to significant barriers. Fixed product-level spending caps have the potential to reduce market efficiency due to their independence from value and the presence of important operational challenges.

Time to rethink dental “insurance”

Time to rethink dental “insurance”

Block Granting Medicaid: A Model for Twenty-First Century Health Reform?

Block Granting Medicaid: A Model for Twenty-First Century Health Reform?

Introduction to Special Issue on the Property Tax and the Financing of K–12 Education

reschovsky@lafollette.wisc.edu The property tax is the mainstay of local K–12 education revenue. Public schools derive over 80 percent of their local own-source revenue from the property tax (Reschovsky 2014). At the same time, nearly half of total property tax dollars collected in the United States is used to finance public elementary and secondary education (U.S. Census Bureau 2013, 2014). This close link between property taxation and school finance is one motivation for this special issue. Another motivation is the state and local fiscal aftermath of the Great Recession. Over the past few years the financing of public elementary and secondary education has become particularly challenging. In real per pupil terms, total revenues devoted to public education fell by 6.2 percent between the 2008–09 and 2011–12 school years.2 Although comprehensive revenue data are not yet available for the most recent years, existing evidence points to a continued decline in financial support for public education. Data from the U.S. Census Bureau’s Quarterly Summary of State and Local Tax Revenue indicate that per capita real local government property tax revenues (for school and non-school purposes) declined by 3 percent between fiscal years 2011 and 2013 (Collins and Langley 2014). And a survey conducted by the Center on Budget and Policy Priorities found that in 33 states, real

R&D ekes out an increase in FY 2015 budget request

With spending caps in place, President Obama proposes an off-budget fund to support additional R&D. NASA would ground a flying observatory, and DOE would sharply curtail its nonproliferation programs.

Improving the Quality and Lowering the Cost of Health Care: Medicare Reforms from the National Commission on Physician Payment Reform

Improving the Quality and Lowering the Cost of Health Care: Medicare Reforms from the National Commission on Physician Payment Reform

What Not to Ask of Budget Processes: Lessons from George W. Bush’s Years

Budget reform requires goals that are both good public policy and achievable. The core purpose of budgeting is to consider and relate details and totals. Common demands for reform are dubious because they slight consideration of details. For this reason, too strict a definition of “balance” would be bad policy; the demand for balance over many decades is neither good policy nor realistic; and multiyear discretionary spending caps can be both bad policy and impractical. Concern about passing annual budget resolutions ignores the fact that the major reason for annual totals is no longer endorsed by policy makers and economists. Scorekeeping should be honest and accurate and often can be improved, but possible achievements are limited. Budget reforms will not make government accountable if the governing coalition is united in seeking to avoid that, and if neither the public nor elites demand it.

Washington State Lawmakers Expand Parity Mandate

Back to table of contents Previous article Next article Government NewsFull AccessWashington State Lawmakers Expand Parity MandateRich DalyRich DalySearch for more papers by this authorPublished Online:4 May 2007https://doi.org/10.1176/pn.42.9.0010aPsychiatrists are celebrating a new Washington state law that expands mental health parity legislation first enacted two years ago.Last month Gov. Chris Gregoire (D) signed legislation (HB 1460) that extended existing mental health parity requirements to individual and small-group insurance plans. It built on legislation passed two years ago that required all private health insurance policies to provide equal coverage for medical and mental health treatment for large companies—more than 51 employees—by adding companies with fewer than 50 employees. The measure will become effective on January 1, 2008.“This was one of our leading priorities,” said Sharon Farmer, M.D., chair of the Government Relations Committee of the Washington State Psychiatric Association (WSPA), about the law.Farmer told Psychiatric News that psychiatrists worked closely with the Washington State Medical Association and the 142-member Washington Coalition for Insurance Parity, which pushed for the bill's passage. The WSPA dropped a push for legislation that would overhaul insurance and Medicaid coding for psychiatrists to focus on the parity push in this session of the state legislature.The parity law will require health plans to apply the same copayments and out-of-pocket spending caps to all mental, surgical, and other medical procedures. After July 2010, all deductibles must be uniform, and the number of psychotherapy sessions and other mental health treatments may not be capped unless the caps are applied to all medical conditions.The mental health parity requirement enacted in 2005 became effective January 1, 2006, with requirements that maximum out-of-pocket limits and a single deductible be phased in by 2008 and 2010, respectively.Gregoire described the measure as helping to create one of the strongest mental health parity requirements in the nation. Although 41 states have some type of parity law, according to APA, 20 states—including Washington—provide exemptions for some small groups from their law's requirements.“Mental illness, like any illness, must be treated seriously, with timely attention and care,” Gregoire said in a written statement.“ Requiring coverage for mental health care is common sense and means that Washingtonians will get better and more comprehensive care, which is less expensive.”Supporters est imated that about 540,000 more Washington residents would have mental health coverage through the law. The 2005 law covered about 1.5 million people, including state employees and beneficiaries in Washington's Basic Health Plan, a subsidized health insurance program for the working poor.Supporters said the biggest beneficiaries of the new law will be individual insurance buyers, because no individual health plans in the state have mental health benefits. Patients with severe mental disorders that require prolonged treatment also would gain, because the law will lift some limits that insurance plans are now allowed to impose on the coverage of psychiatric treatment.Critics of the law described it as a new mandate on businesses that have smaller profit margins and less flexibility in the insurance they offer employees than companies with hundreds of employees.Parity proponents countered that an actuarial analysis conducted for the coalition in December 2006 found that the legislation would increase costs for small business and individual plans by only about .05 percent to 1.5 percent. The analysis did not include the expected benefits of mental health parity, which research has shown can result in increased worker productivity, a decrease in absenteeism, and fewer disability claims. Supporters said the law would save society money in the long run through reduced homelessness, emergency-room use, and jail time, which are exacerbated by mental illness.Parity studies have shown that it has minimal cost impact, “and anyway it's likely to be offset by the benefits,” said Christos Dagadakis, M.D., chair of the WSPA's Public Affairs Committee, in an interview with Psychiatric News.The coalition pushed for many years to have legislators approve the state's first parity law, but the recent measure worked its way through the legislature with very little opposition. The bill's quick passage has encouraged the psychiatrists to consider further parity changes in coming years. About two-thirds of Washington residents, or about 4 million people, remain uncovered by the new rules, because they receive their health insurance through federal public health programs or employers who self-insure.“Our plan is to build on parity in small steps,” Farmer said.Mental health parity supporters said they hoped the law would not be overridden by a weaker federal measure under consideration in Congress (see Original article: "DBs Voice Caution About Some Parity Bill Provisions").The Washington parity legislation is posted at<http://apps.leg.wa.gov/billinfo/summary.aspx?bill=1460&year=2007>.▪ ISSUES NewArchived

Regulation of pharmaceutical markets in Germany: improving efficiency and controlling expenditures?

Rising pharmaceutical expenditure has become a major concern for policy makers in Germany over recent years. Therefore, the pharmaceutical market has been increasingly targeted by different kinds of regulation, focussing on both the supply and the demand side, using price, volume and spending controls. Specific regulations include price reductions, reference pricing, pharmacy rebates for sickness funds, increasing co-payments, an 'autidem' substitution, parallel imports, a negative list, directives, and finally, spending caps for pharmaceutical expenditure per physicians' association. Although it is difficult to attribute certain effects to single measures, some measures like reference pricing and physician spending caps are more effective and long-lasting than others. In spite of being opposed by physicians, the spending caps applied between 1993 and 2001 have limited pharmaceutical expenditure for an entire decade. However, while some measures do effectively control expenditures, their effect on allocative efficiency may be detrimental.

Impacts of the Doha Round Framework Agreements on Dairy Policies

Dairy is highly regulated in many countries for several reasons. Perishability, seasonal imbalances, and inelastic supply and demand for milk can cause inherent market instability. Milk buyers typically have had more market power than dairy farmers. Comparative production advantages in some countries have led to regulations and policies to protect local dairy farmers by maintaining domestic prices higher than world prices. A worldwide consensus on reduction of border measures for protecting dairy products is unlikely, and dairy will probably be an exception in ongoing World Trade Organization (WTO) negotiations. Under the Doha Round framework agreements, countries may name some products such as dairy as “sensitive,” thereby excluding them from further reforms. However, new Doha Round framework agreements depart from the current WTO rule and call for product-specific spending caps. Such caps will greatly affect the dairy sector because dairy accounts for much of the aggregate measure of support (AMS) in several countries, including the United States and Canada. Also, the amounts of dairy AMS in several countries may be recalculated relative to an international reference price. In addition, all export subsidies are targeted for elimination in the Doha Round, including export credit programs and state trading enterprises, which will limit options for disposing of surplus dairy products in foreign markets. Currently, with higher domestic prices, measures for cutting or disposing of surpluses have been used in many countries. Supply control, which is not regulated by WTO rules, remains as an option. Although explicit export subsidies are restricted by WTO rules, many countries use esoteric measures to promote dairy exports. If countries agree to eliminate “consumer financed” export subsidies using a theoretical definition and measurements proposed herein as Export Subsidy Equivalents (ESE), dairy exports in many countries may be affected. Although domestic supports and export subsidies will be reduced in the Doha Round, possible exclusion of “sensitive” products from tariff reduction will help some countries’ dairy sectors survive after those final agreements. A key concern for those countries will be the simultaneous restriction of surplus-disposing measures. With fewer marketing options for surpluses, countries that continue border protection and high internal prices will likely be forced to use domestic supply control programs in the future.

Table of Contents

AbstractFrom New Rules to Spending Caps, Medicaid Programs Face Major ChangesTexas Embarks on Disease Management Model for People with Serious MILooming Cuts in Washington Would Devastate One ProviderLegislators Protest OIG Interpretation of IMD ExclusionParents, Teens Give Positive Reviews on Impact of ADHD TreatmentCall for ParticipantsNames in the NewsResourcesBusiness NotesBriefly NotedComing Up

The Perverse Effect of Spending Caps

Spending caps have become popular as a means to curb public expenditure. But the effect of spending caps is unsettled both theoretically and empirically. The most thorough treatment of the issue is provided by Ferejohn and Krehbiel, who argue that it is necessary to take preferences of politicians into account when analyzing the effect of spending caps. They conclude that spending caps may have both desirable and perverse effects, i.e. lead to lower and higher spending. Unfortunately Ferejohn and Krehbiel’s model has never been tested and it is not clear how it fares theoretically in systems with more than two issues. This article makes two contributions. First, it generalizes Ferejohn and Krehbiel’s model to cover systems with as many issues as in real world budgeting. Second, it provides an empirical test of this model. To avoid problems of measurement and endogeneity, the test is conducted as an experiment. It confirms the general model, supporting the claim that spending caps have predictable but counter-intuitive effects on spending.