The Contribution of Price Growth to Pharmaceutical Revenue Growth in the United States: Evidence from Medicines Sold in Retail Pharmacies

CONTEXT

To what extent does pharmaceutical revenue growth depend on new medicines versus increasing prices for existing medicines? Moreover, does using list prices, as is commonly done, instead of prices net of confidential rebates offered by manufacturers, which are harder to observe, change the relative importance of the sources of revenue growth?

METHODS

This study uses data from SSR Health LLC to address these research questions using decomposition methods that analyze list prices, prices net of rebates, and sales for branded pharmaceutical products sold primarily through retail pharmacies.

FINDINGS

From 2009 to 2019, retail pharmaceutical revenue growth was primarily driven by new products rather than by price increases on existing products. Failing to account for confidential rebates creates a more prominent role for price increases in explaining revenue growth, because list price inflation during this period was 10.9%, whereas net price inflation was 3.3%.

CONCLUSIONS

Policies that restrict price growth on existing medicines likely need to be coupled with policies that reduce launch prices to have a meaningful long-term impact on pharmaceutical revenue growth. Using pharmaceutical list prices is often an inadequate approximation for net prices because the role of rebates has increased and varies by drug class.

The impact of physician-hospital integration on spending and quality of oncology care

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Background: There has been increasing hospital and health system ownership of physician practices in recent years, particularly in oncology. However, relatively little is known about how this impacts care delivery for patients with cancer, who use many hospital-based services that may be impacted by integration. We evaluated the impact of physician-hospital integration in oncology on spending and quality of care for Medicare beneficiaries with cancer. Methods: We used Medicare Fee-for-Service claims from 2005-2019 linked with a unique Health System and Provider Database, developed by National Bureau of Economic Research and Harvard University researchers, to track practice ownership relationships over time. We used a stacked event study to assess outcomes for patients three years before and after oncologists move from independent practices to hospital- or system- owned practices. We compared outcomes to a control group with oncologists who shifted from independent to hospital- or system-owned practices in later years. We focused on two cohorts of patients. The first cohort included cancer patients with presumed incident or recurrent cancer based on ≥2 visits to an oncologist and no visit in the past year. For these patients, we evaluated the impact of physician-hospital integration on the likelihood of receiving chemotherapy following the visit. The second cohort included 6-month episodes for patients receiving chemotherapy. For these patients we evaluated the impact of physician-hospital integration on spending, utilization, and quality. Quality measures included receipt of timely chemotherapy (within 60 days) following surgery, inpatient readmissions, non-use of tamoxifen + strong CYPD26 inhibitors, and end-of-life intensity of care measures. Results: There was no change in the likelihood of receiving chemotherapy with an initial oncology consultation following an oncologist’s transition to hospital-based employment. Total spending during six-month chemotherapy episodes increased by $1391 (95%CI: $465, $2316). The primary contributors to this growth were increases in spending on inpatient care, chemotherapy administration, and office visits. Spending growth, where observed, was driven primarily by higher Medicare prices for care in hospital outpatient settings. We found no positive impact of physician-hospital integration on timeliness of chemotherapy initiation, readmissions, concurrent use of tamoxifen+strong CYPD26 inhibitors, or intensity of end-of-life care. Conclusions: Physician-hospital integration resulted in higher prices and thus higher spending, but had limited impact on utilization and no detectable impacts on measures of quality. These results suggest that claims of quality improvements and concerns regarding overuse associated with physician-hospital integration may be overstated. Our results also support continued movement towards site-neutral payments.

Paying patients to use lower-priced providers

OBJECTIVE

Many employers have introduced rewards programs as a new benefit design in which employees are paid $25-$500 if they receive care from lower-priced providers. Our goal was to assess the impact of the rewards program on procedure prices and choice of provider and how these outcomes vary by length of exposure to the program and patient population.

STUDY SETTING

A total of 87 employers from across the nation with 563,000 employees and dependents who have introduced the rewards program in 2017 and 2018.

STUDY DESIGN

Difference-in-difference analysis comparing changes in average prices and market share of lower-priced providers among employers who introduced the reward program to those that did not.

DATA COLLECTION METHODS

We used claims data for 3.9 million enrollees of a large health plan.

PRINCIPAL FINDINGS

Introduction of the program was associated with a 1.3% reduction in prices during the first year and a 3.7% reduction in the second year of access. Use of the program and price reductions are concentrated among magnetic resonance imaging (MRI) services, for which 30% of patients engaged with the program, 5.6% of patients received an incentive payment in the first year, and 7.8% received an incentive payment in the second year. MRI prices were 3.7% and 6.5% lower in the first and second years, respectively. We did not observe differential impacts related to enrollment in a consumer-directed health plan or the degree of market-level price variation. We also did not observe a change in utilization.

CONCLUSIONS

The introduction of financial incentives to reward patients from receiving care from lower-priced providers is associated with modest price reductions, and savings are concentrated among MRI services.

Physician agency, consumerism, and the consumption of lower-limb MRI scans

We study where privately insured individuals receive planned MRI scans. Despite significant out-of-pocket costs for this undifferentiated service, privately insured patients often receive care in high-priced locations when lower priced options were available. The median patient in our data has 16 MRI providers within a 30-minute drive of her home. On average, patients bypass 6 lower-priced providers between their homes and their actual treatment locations. Referring physicians heavily influence where patients receive care. The share of the variance in the prices of patients' MRI scans that referrer fixed effects (52 percent) explain is dramatically greater than the share explained by patient cost-sharing (< 1 percent), patient characteristics (< 1 percent), or patients' home HRR fixed effects (2 percent). In order to access lower cost providers, patients must generally diverge from physicians' established referral patterns.

Physician Work Hours and the Gender Pay Gap - Evidence from Primary Care

BACKGROUND

The gender gap in physician pay is often attributed in part to women working fewer hours than men, but evidence to date is limited by self-report and a lack of detail regarding clinical revenue and gender differences in practice style.

METHODS

Using national all-payer claims and data from electronic health records, we conducted a cross-sectional analysis of 24.4 million primary care office visits in 2017 and performed comparisons between female and male physicians in the same practices. Our primary independent variable was physician gender; outcomes included visit revenue, visit counts, days worked, and observed visit time (interval between the initiation and the termination of a visit). We created multivariable regression models at the year, day, and visit level after adjustment for characteristics of the primary care physicians (PCPs), patients, and types of visit and for practice fixed effects.

RESULTS

In 2017, female PCPs generated 10.9% less revenue from office visits than their male counterparts (-$39,143.2; 95% confidence interval [CI], -53,523.0 to -24,763.4) and conducted 10.8% fewer visits (-330.5 visits; 95% CI, -406.6 to -254.3) over 2.6% fewer clinical days (-5.3 days; 95% CI, -7.7 to -3.0), after adjustment for age, academic degree, specialty, and number of sessions worked per week, yet spent 2.6% more observed time in visits that year than their male counterparts (1201.3 minutes; 95% CI, 184.7 to 2218.0). Per visit, after adjustment for PCP, patient, and visit characteristics, female PCPs generated equal revenue but spent 15.7% more time with a patient (2.4 minutes; 95% CI, 2.1 to 2.6). These results were consistent in subgroup analyses according to the gender and health status of the patients and the type and complexity of the visits.

CONCLUSIONS

Female PCPs generated less visit revenue than male colleagues in the same practices owing to a lower volume of visits, yet spent more time in direct patient care per visit, per day, and per year. (Funded in part by the Robert Wood Johnson Foundation.).

The risk of emergency department visits in adults living in rural France

Background

Individuals living in rural areas have poorer health outcomes due to complex causal pathways related to socio-economic status, health behaviors and lower use of primary care. Emergency department visits without inpatient admission (hereafter ED visits) are an indirect measure of access to primary care.

Objective

To analyze the determinants of ED visits among French adults living in rural areas.

Methods

We analyze survey data from the CONSTANCES cohort study, a representative sample of French adults aged 18-69 years. These data on individuals’ demographics, self-reported and physician-reported clinical indicators, and individual socio-economic status, are linked to France’s claims database (SNIIRAM). We analyze the risk of having at least one ED visit, in 2016, using a multivariate logistic regression model.

Results

Among 12,834 adults included in the study, 1,412 (11%) had at least one ED visit in 2016. After adjustment, the ED visit risk was associated negatively with female gender (OR = 0.87; p &lt; 0.01), age (OR = 0.97; p &lt; 0.01), secondary education (OR = 0.85; p = 0.03), higher use of GPs (OR = 0.99; p = 0.02); and positively associated with the number of comorbidities (OR = 1.1; p &lt; 0.01), poorer self-reported health status (OR = 1.01; p = 0.02), a higher self-reported depression score (OR = 1.01; p = 0.02), and acute care inpatient admissions (OR = 2.4; p &lt; 0.01).

Conclusions

These results suggest that, among adults living in rural France, those with a lower educational level are at higher risk of ED visits.

Policy implications: To reduce health disparities among rural and urban areas, policymakers and primary care professionals should focus on targeted outreach strategies to identify high-needs individuals.

Key messages

The risk of emergency department visit varies significantly among adult living in rural France. Among adults living in rural France, those with a lower educational level are at higher risk of ED visit.

Abstract 224: Recent Trends in Coronary Artery Disease Quality Performance and Implications for Clinical Practice in the Era of Alternative Payment Models

Background: In light of recent shifts away from fee-for-service and toward alternative payment models (APM), national trends in quality performance for common cardiac conditions, such as CAD, are important for identifying areas for quality improvement and also for determining physician/health system reimbursement.

Methods: Using Medicare data from 2010-2013, we created a cohort of patients with CAD using a combination of chronic condition warehouse (CCW) flags, ICD-9 and CPT codes. We the determined national performance trends for the 2011 ACC/AHA CAD performance measures. For drug use metrics, we used 80% of days covered after the index event as the threshold.

Results: From 2010-2013, performance trends for testing (annual LDL) and post-MI metrics (beta blocker use, P2Y12 use and cardiac rehab) were flat (p=ns). Among patients with CAD and another comorbidity such as heart failure or diabetes, neurohormonal therapy use increased (p<0.001, Figure 1 ).

Conclusion: The rate of neurohormonal therapy use in patients with CAD and another comorbidity improved while testing and post-MI performance in patients with CAD alone changed little. The reasons for this and may relate to an increased emphasis on complex, costly patients in APMs. Whether these trends impact longer-term patient outcomes should be explored.

Effects of episode-based payment on health care spending and utilization: Evidence from perinatal care in Arkansas

We study how physicians respond to financial incentives imposed by episode-based payment (EBP), which encourages lower spending and improved quality for an entire episode of care. Specifically, we study the impact of the Arkansas Health Care Payment Improvement Initiative, a multi-payer program that requires providers to enter into EBP arrangements for perinatal care, covering the majority of births in the state. Unlike fee-for-service reimbursement, EBP holds physicians responsible for all care within a discrete episode, rewarding physicians for efficient use of their own services and for efficient management of other health care inputs. In a difference-in-differences analysis of commercial claims, we find that perinatal spending in Arkansas decreased by 3.8% overall under EBP, compared to surrounding states. The decrease was driven by reduced spending on non-physician health care inputs, specifically the prices paid for inpatient facility care. We additionally find a limited improvement in quality of care under EBP.

Abstract 35: Trends in Statin Use and Adherence and the Impact of the 2013 Cholesterol Guidelines

Background: In 2013, the ACC/AHA updated the cholesterol treatment guidelines. At the time, it was estimated that an additional 13 million Americans would quality for statin therapy. To date, the real-world implications of this guideline change have not been well studied. This study aims to better understand trends in statin use and adherence, by gender, and the impact of guideline change.

Methods: This is a retrospective, observational study using medical and pharmacy claims from 2009 to 2014 from a large, national, commercial insurer. Considering all beneficiaries aged 18-65 with ≥1 year of continuous enrollment, we created annual cross sectional populations of statin-eligible patients and divided them into 3 statin benefit groups (SBG). In descending order of risk, the groups were: (1) atherosclerotic cardiovascular disease (ASCVD); (2) diabetes and (3) hyperlipidemia. Patients were assigned to the highest risk group that they qualified for.

Results: Statin use rates among those with ASCVD increased until 2012 and then plateaued (Figure 1a ). Use rates among those with diabetes, were flat until 2011 and then increased. Use rates among those with hyperlipidemia steadily rose from 2009-2014. Statin adherence rates among those with ASCVD increased from 2009-2014 ( Figure 1b ). Adherence rates among those with diabetes, decreased from 2009-2011 and then rose significantly from 2011-2014. Adherence rates among those with hyperlipidemia also rose steadily from 2009-2014. The most significant gender gap in treatment, for both use and adherence, was between men and women with ASCVD. There was with little change in this treatment gap, in any risk group, over the time period observed.

Conclusion: The 2013 cholesterol guidelines have not yet had a significant effect on statin use or adherence. Recently improving trends in statin use and adherence, especially among patients with diabetes, appear to predate the 2013 guideline change. A significant gender gap in statin treatment remains, especially among those in the highest risk group.

HEDIS Measures and Managed Care Enrollment

This article examines the relationship between 1996 health plan enrollment and both HEDIS-based plan performance ratings and individual HEDIS measures. Data were obtained from a large firm that collected, aggregated, and disseminated plan performance ratings to its employees. Plan market share regressions are estimated controlling for out-of-pocket price and model type in addition to the plan ratings and HEDIS measures. The results suggest that employees did not respond strongly to the provided ratings. There are several potential explanations for the lack of response, including difficulty understanding the ratings and never having seen them. In addition, employees may base their plan choices on information that is obtained from their own past experience, friends, family, and colleagues. The pattern of results suggests that such information is important. Counterintuitive signs most likely reflect an inverse correlation between some HEDIS ratings (or measures) and attributes employees observe informally.

Options for Assessing PPO Quality: Accreditation and Profiling as Accountability Strategies

This article examines and discusses various alternatives for measuring the quality of care and services provided by preferred provider organizations (PPOs). The topic is approached from both a conceptual and a practical perspective, outlining key assumptions that underlie the desire to measure the quality of PPOs, while considering the current limitations and difficulties associated with existing PPO arrangements. Although the article does not provide normative judgments about which approach is best, it attempts to highlight the advantages and disadvantages of possible approaches in an unbiased manner. Significant attention is given to accreditation and profiling as possible methods for assessing the quality of care in PPOs.

Market and Plan Characteristics Related to HMO Quality and Improvement

Existing research on health plan performance examines whether variation in plans’ scores is related to enrollee and health plan traits, primarily using cross-sectional research designs. This study extends that literature by incorporating data on market characteristics using a longitudinal framework. We estimate multivariate growth models that relate plan performance on standard measures to market and HMO characteristics using an unbalanced panel of data for 1998 to 2002. We find that HMO competition is not associated with better performance or greater rates of improvement in performance on the HEDIS chronic care measures. HMO penetration, on the other hand, is positively associated with HEDIS performance in several of the chronic care process-and-outcomes measures but not with a greater rate of improvement through time. Our analysis indicates that a significant percentage of the unexplained variation in quality improvement is because of permanent, unobserved plan-level characteristics that future research should strive to identify.

Options for Assessing PPO Quality: Accreditation and Profiling as Accountability Strategies

This article examines and discusses various alternatives for measuring the quality of care and services provided by preferred provider organizations (PPOs). The topic is approached from both a conceptual and a practical perspective, outlining key assumptions that underlie the desire to measure the quality of PPOs, while considering the current limitations and difficulties associated with existing PPO arrangements. Although the article does not provide normative judgments about which approach is best, it attempts to highlight the advantages and disadvantages of possible approaches in an unbiased manner. Significant attention is given to accreditation and profiling as possible methods for assessing the quality of care in PPOs.

Screening Mammography for Free: Impact of Eliminating Cost Sharing on Cancer Screening Rates

OBJECTIVES

To study the impact of eliminating cost sharing for screening mammography on mammography rates in a large Medicare Advantage (MA) health plan which in 2010 eliminated cost sharing in anticipation of the Affordable Care Act mandate.

STUDY SETTING

Large MA health maintenance organization offering individual-subscriber MA insurance and employer-supplemented group MA insurance.

STUDY DESIGN

We investigated the impact on breast cancer screening of a policy that eliminated a $20 copayment for screening mammography in 2010 among 53,188 women continuously enrolled from 2007 to 2012 in an individual-subscriber MA plan, compared with 42,473 women with employer-supplemented group MA insurance in the same health maintenance organization who had full screening coverage during this period. We used differences-in-differences analysis to study the impact of cost-sharing elimination on mammography rates.

PRINCIPAL FINDINGS

Annual screening rates declined over time for both groups, with similar trends pre-2010 and a slower decline after 2010 among women whose copayments were eliminated. Among women aged 65-74 years in the individual-subscriber MA plan, 44.9 percent received screening in 2009 compared with 40.9 percent in 2012, while 49.5 percent of women in the employer-supplemented MA plan received screening in 2009 compared with 44.1 percent in 2012, that is, a difference-in-difference effect of 1.4 percentage points less decline in screening among women experiencing the cost-sharing elimination. Effects were concentrated among women without recent screening. There were no differences by neighborhood socioeconomic status or race/ethnicity.

CONCLUSIONS

Eliminating cost sharing for screening mammography was associated with modesty lower decline in screening rates among women with previously low screening adherence.

Compensating wage differentials and the impact of health insurance in the public sector on wages and hours

This paper examines the trade-off between wages and employer spending on health insurance for public sector workers, and the relationship between coverage and hours worked. Our primary approach compares trends in wages and hours for public employees with and without state/local government provided health insurance using individual-level micro-data from the 1992-2011 CPS. To adjust for differences between insured and uninsured public sector employees, we create a matched sample based on an employee's propensity to receive health insurance. We assess the relationship between state contribution to the health plan premium, state-level healthcare spending, and the wages and hours of state and local government employees. We find modest reductions in wages are associated with having employer-sponsored health insurance (ESHI), although this effect is not precisely measured. The reduction in wages associated with having ESHI is larger among non-unionized workers. Further, we find little evidence that provision of health insurance increases hours worked.

Using propensity scores in difference-in-differences models to estimate the effects of a policy change

Difference-in-difference (DD) methods are a common strategy for evaluating the effects of policies or programs that are instituted at a particular point in time, such as the implementation of a new law. The DD method compares changes over time in a group unaffected by the policy intervention to the changes over time in a group affected by the policy intervention, and attributes the "difference-in-differences" to the effect of the policy. DD methods provide unbiased effect estimates if the trend over time would have been the same between the intervention and comparison groups in the absence of the intervention. However, a concern with DD models is that the program and intervention groups may differ in ways that would affect their trends over time, or their compositions may change over time. Propensity score methods are commonly used to handle this type of confounding in other non-experimental studies, but the particular considerations when using them in the context of a DD model have not been well investigated. In this paper, we describe the use of propensity scores in conjunction with DD models, in particular investigating a propensity score weighting strategy that weights the four groups (defined by time and intervention status) to be balanced on a set of characteristics. We discuss the conceptual issues associated with this approach, including the need for caution when selecting variables to include in the propensity score model, particularly given the multiple time point nature of the analysis. We illustrate the ideas and method with an application estimating the effects of a new payment and delivery system innovation (an accountable care organization model called the "Alternative Quality Contract" (AQC) implemented by Blue Cross Blue Shield of Massachusetts) on health plan enrollee out-of-pocket mental health service expenditures. We find no evidence that the AQC affected out-of-pocket mental health service expenditures of enrollees.

Real-world impact of comparative effectiveness research findings on clinical practice

OBJECTIVES

Unprecedented funding for comparative effectiveness research (CER) to help provide better evidence for decision making as a way to lower costs and improve quality is under way. Yet how research findings are adopted and applied will impact the nation's return on this investment. We examine the relationship between the publication of findings from 4 seminal CER trials, the release of subsequent clinical practice guidelines (CPGs), and utilization trends for associated surgical interventions, diagnostic interventions, or medications.

STUDY DESIGN

Retrospective, observational study.

METHODS

Using a large national administrative claims database, we examined time series utilization trends before and after publication of findings from 4 CER trials published within the last decade.

RESULTS

We found no clear pattern of utilization in the first 4 quarters after publication. However, we found that results for 2 of the studies were in concert with the release of CPGs and publication of study results. The trend in intensive statin therapy rose rapidly starting at the end of 2007, while the trend in standard therapy remained relatively constant (PROVE-IT). And, 9 months after trial publication, breast magnetic resolution imaging (MRI) utilization rates rose 43.2%, from 0.033 to 0.048 per 100 enrollees (Mammography With MRI).

CONCLUSIONS

Our analysis of 4 case studies supports the call others have made to translate and disseminate CER findings to improve application of research findings to clinical practice and the need for continued development and dissemination of CPGs that serve to synthesize research findings and guide practitioners in clinical decision making. Further research is needed to determine whether these findings apply to different medical topics.

Insurer market structure and variation in commercial health care spending

OBJECTIVE

To examine the relationship between insurance market structure and health care prices, utilization, and spending.

DATA SOURCES

Claims for 37.6 million privately insured employees and their dependents from the Truven Health Market Scan Database in 2009. Measures of insurer market structure derived from Health Leaders Inter study data.

METHODS

Regression models are used to estimate the association between insurance market concentration and health care spending, utilization, and price, adjusting for differences in patient characteristics and other market-level traits.

RESULTS

Insurance market concentration is inversely related to prices and spending, but positively related to utilization. Our results imply that, after adjusting for input price differences, a market with two equal size insurers is associated with 3.9 percent lower medical care spending per capita (p = .002) and 5.0 percent lower prices for health care services relative to one with three equal size insurers (p < .001).

CONCLUSION

Greater fragmentation in the insurance market might lead to higher prices and higher spending for care, suggesting some of the gains from insurer competition may be absorbed by higher prices for health care. Greater attention to prices and utilization in the provider market may need to accompany procompetitive insurance market strategies.

Health care spending growth: can we avoid fiscal Armageddon?

Both private and public payers have experienced a persistent rise in health care spending that has exceeded income growth. The issue now transcends the health care system because health care spending growth threatens the fiscal health of the nation. This paper examines the causes and consequences of health care spending growth. It notes that the determinants of spending growth may differ from the determinants of high spending at a point in time. Specifically, the evidence overwhelmingly suggests that the primary driver ofinflation-adjusted, per capita spending growth over the past decades (and thus premium growth) has been the diffusion of new medical technology. The paper argues that while new technology has provided significant clinical benefit, we can no longer afford the persistent gap between health spending and income growth. In simple terms, if the economy is growing 2%, we cannot afford persistent health care spending growth of 4%. Growth in public spending is particularly important. If not abated, high public spending will require either substantially higher taxes or debt, both of which could lead to fiscal Armageddon. Growth in private spending also threatens economic well-being by forcing more resources toward health care and away from other sectors. For example, since the cost of employer-based coverage is always borne by employees (directly or indirectly), salary increases and health care cost increases cannot continue on together. To avoid economic disaster, payers will be forced to have a greater resolve in the future. Specifically, because neither public nor private payers will be able to finance growing health care spending, the coming decade will likely experience significant changes in health care financing. Consumers may be asked to pay more out of pocket when they seek care and both public and private payers will put increasing pressure on payment rates. Furthermore, payment rates to providers are likely to rise more slowly than in the past, likely by less than inflation, and a new form of payment that bundles reimbursement across providers and services will be implemented. All stakeholders, particularly health care providers, will need to adapt to the pressure. Ideally, this will lead to more efficient care delivery that will require a partnership among major stakeholders to develop systems of managing population health in ways that promote affordable, high-quality outcomes.

Bending the curve through health reform implementation

In September 2009, we released a set of concrete, feasible steps that could achieve the goal of significantly slowing spending growth while improving the quality of care. We stand by these recommendations, but they need to be updated in light of the new Patient Protection and Affordable Care Act (ACA). Reducing healthcare spending growth remains an urgent and unresolved issue, especially as the ACA expands insurance coverage to 32 million more Americans. Some of our reform recommendations were addressed completely or partially in ACA, and others were not. While more should be done legislatively, the current reform legislation includes important opportunities that will require decisive steps in regulation and execution to fulfill their potential for curbing spending growth. Executing these steps will not be automatic or easy. Yet doing so can achieve a healthcare system based on evidence, meaningful choice, balance between regulation and market forces, and collaboration that will benefit patients and the economy (see Appendix A for a description of these key themes). We focus on three concrete objectives to be reached within the next five years to achieve savings while improving quality across the health system: 1. Speed payment reforms away from traditional volume-based payment systems so that most health payments in this country align better with quality and efficiency. 2. Implement health insurance exchanges and other insurance reforms in ways that assure most Americans are rewarded with substantial savings when they choose plans that offer higher quality care at lower premiums. 3. Reform coverage so that most Americans can save money and obtain other meaningful benefits when they make decisions that improve their health and reduce costs. We believe these are feasible objectives with much progress possible even without further legislation (see Appendix B for a listing of recommendations). However, additional legislation is still needed to support consumers – including Medicare beneficiaries – in making choices that reduce costs while improving health.

Trends in patient cost sharing for clinical services used as quality indicators

BACKGROUND

Patient copayments for all medical services have increased dramatically. There are few data available regarding how copayments have changed for services commonly considered to be quality indicators.

OBJECTIVE

Describe the relative change in copayments for services used as quality indicators and interventions subject to programs to control utilization.

DESIGN

A large claims database was used to assess copayment changes from 2001 to 2006 for selected drug and non-drug services in patient cohorts with specific chronic diseases.

SUBJECTS

Approximately 5 million commercially-insured individuals enrolled in a variety of fee-for-service and capitated health plans.

MEASUREMENTS

Copayment trends were calculated as the change in the average amount paid per unit service from 2001 to 2006.

RESULTS

Out-of-pocket payments for services targeted by quality improvement initiatives increased substantially [>50%] and in a similar magnitude to interventions subject to programs to control their use. For prescription drugs, the trend was driven more by copayment increases for branded medications [$10 per prescription] than for generic drugs [$2 per prescription]. Copayments for non-drug preventive services rose modestly.

CONCLUSIONS

Benefit designers should consider reversing the trend of copayment increases for services considered to be indicators of high quality care.

Cost Sharing and HEDIS Performance

Physicians, health plans, and health systems are increasingly evaluated and rewarded based on Health Plan Effectiveness Data and Information Set (HEDIS) and HEDIS-like performance measures. Concurrently, employers and health plans continue to try to control expenditures by increasing out-of-pocket costs for patients. The authors use fixed-effect logit models to assess how rising copayment rates for physician office visits and prescription drugs affect performance on HEDIS measures. Findings suggest that the increase in copayment rates lowers performance scores, demonstrating the connection between financial aspects of plan design and quality performance, and highlighting the potential weakness of holding plans and providers responsible for performance when payers and benefit plan managers also influence performance. Yet the effects are not consistent across all domains and, in many cases, are relatively modest in magnitude. This may reflect the HEDIS definitions and suggests that more sensitive measures may capture the impact of benefit design changes on performance.

Managed care and medical expenditures of Medicare beneficiaries

This paper investigates the impact of Medicare HMO penetration on the medical care expenditures incurred by Medicare fee-for-service (FFS) enrollees. We find that increasing penetration leads to reduced spending on FFS beneficiaries. In particular, our estimates suggest that the increase in HMO penetration during our study period led to approximately a 7% decline in spending per FFS beneficiary. Similar models for various measures of health care utilization find penetration-induced reductions consistent with our spending estimates. Finally, we present evidence that suggests our estimated spending reductions are driven by beneficiaries who have at least one chronic condition.

Do Determinants of Medicare Supplemental Coverage Choice Vary by Income?

Using data from the Community Tracking Study Household Survey (1998-99), we estimate the relationship between Medigap premiums and senior Medicare beneficiaries' supplemental coverage decisions. All seniors are more likely to be enrolled in an HMO in markets with higher Medigap prices. Lower income seniors are particularly sensitive to Medigap premiums and are more likely to have no supplemental coverage when faced with higher Medigap premiums. As Medicare supplemental options evolve in response to the 2003 Medicare Modernization Act, it is important to consider that lower income beneficiaries may respond to price changes and other factors differently than their higher income counterparts.

Does competition improve health care quality?

OBJECTIVE

To identify the effect of competition on health maintenance organizations' (HMOs) quality measures.

STUDY DESIGN

Longitudinal analysis of a 5-year panel of the Healthcare Effectiveness Data and Information Set (HEDIS) and Consumer Assessment of Health Plans Survey(R) (CAHPS) data (calendar years 1998-2002). All plans submitting data to the National Committee for Quality Assurance (NCQA) were included regardless of their decision to allow NCQA to disclose their results publicly.

DATA SOURCES

NCQA, Interstudy, the Area Resource File, and the Bureau of Labor Statistics.

METHODS

Fixed-effects models were estimated that relate HMO competition to HMO quality controlling for an unmeasured, time-invariant plan, and market traits. Results are compared with estimates from models reliant on cross-sectional variation.

PRINCIPAL FINDINGS

Estimates suggest that plan quality does not improve with increased levels of HMO competition (as measured by either the Herfindahl index or the number of HMOs). Similarly, increased HMO penetration is generally not associated with improved quality. Cross-sectional models tend to suggest an inverse relationship between competition and quality.

CONCLUSIONS

The strategies that promote competition among HMOs in the current market setting may not lead to improved HMO quality. It is possible that price competition dominates, with purchasers and consumers preferring lower premiums at the expense of improved quality, as measured by HEDIS and CAHPS. It is also possible that the fragmentation associated with competition hinders quality improvement.

Persistence of HMO performance measures

OBJECTIVE

To simplify the decision-making process, we propose and implement an approach to assess the stability of health plan performance over time when multiple indicators of performance exist.

DATA SOURCE

National Committee for Quality Assurance Health Care Effectiveness Data and Information Set data for childhood immunization for both publicly and non-publicly reporting health plans between 1998 and 2002. DATA/STUDY DESIGN: We use longitudinal data to examine whether plan quality ratings are stable from year to year. We estimate a parametric Multiple Indicator Multiple Cause Model, a model which allows us to aggregate the multiple measures of performance. The model controls for observed characteristics of the plan and market, allowing for unmeasured heterogeneity.

PRINCIPAL FINDINGS

We find moderate persistence in plan performance over time. A plan in the upper tier of performance in the year 1999 has only a 0.47 probability of remaining in the upper tier in the year 2001. Multiple years of good performance increase the probability of good performance in the future. For example, from the subset of plans in the upper tier of performance in 1999, 63 percent continued to perform in the upper tier in 2000. However, from the subset of plans in the upper tier in both 1998 and 1999, about three-fourths of the plans continued to perform in the upper tier in the year 2000. Finally, better performance in the more recent past is more indicative of better performance in the future than better performance in the more distant past.

CONCLUSIONS

Although there is some persistence in health plan ratings over time, it is not uncommon for ratings of plans to change between when the data are generated and when actions based on that data, such as employers' contracting decisions or consumers' enrollment decisions, may take effect. Decision makers should be cognizant of this issue and methods should be developed to mitigate its consequences.

Effects of increased patient cost sharing on socioeconomic disparities in health care

BACKGROUND

Increasing patient cost sharing is a commonly employed mechanism to contain health care expenditures.

OBJECTIVE

To explore whether the impact of increases in prescription drug copayments differs between high- and low-income areas.

DESIGN

Using a database of 6 million enrollees with employer-sponsored health insurance, econometric models were used to examine the relationship between changes in drug copayments and adherence with medications for the treatment of diabetes mellitus (DM) and congestive heart failure (CHF).

SUBJECTS

Individuals 18 years of age and older meeting prespecified diagnostic criteria for DM or CHF were included.

MEASUREMENTS

Median household income in the patient's ZIP code of residence from the 2000 Census was used as the measure of income. Adherence was measured by medication possession ratio: the proportion of days on which a patient had a medication available.

RESULTS

Patients in low-income areas were more sensitive to copayment changes than patients in high- or middle-income areas. The relationship between income and price sensitivity was particularly strong for CHF patients. Above the lowest income category, price responsiveness to copayment rates was not consistently related to income.

CONCLUSIONS

The relationship between medication adherence and income may account for a portion of the observed disparities in health across socioeconomic groups. Rising copayments may worsen disparities and adversely affect health, particularly among patients living in low-income areas.

Health insurance and labor markets: concepts, open questions, and data needs

This paper reviews the recent economic research on the relationship between health insurance and labor markets in the United States, with an emphasis on research that has emerged since existing major reviews and the aim of identifying the types of data that are needed for this research to progress. We focus on the conceptual and empirical challenges that researchers face in studying these relationships, the data that have allowed this research to proceed, policy-relevant questions that need further study, and the types of data that would help in obtaining better answers to these questions.

Competition in health insurance markets: limitations of current measures for policy analysis

Health care reform proposals often rely on increased competition in health insurance markets to drive improved performance in health care costs, access, and quality. We examine a range of data issues related to the measures of health insurance competition used in empirical studies published from 1994-2004. The literature relies exclusively on market structure and penetration variables to measure competition. While these measures are correlated, the degree of correlation is modest, suggesting that choice of measure could influence empirical results. Moreover, certain measurement issues such as the lack of data on PPO enrollment, the treatment of small firms, and omitted market characteristics also could affect the conclusions in empirical studies. Importantly, other types of measures related to competition (e.g., the availability of information on price and outcomes, degree of entry barriers, etc.) are important from both a theoretical and policy perspective, but their impact on market outcomes has not been widely studied.

The ‘Graying’ Of Group Health Insurance

We examine differential declines in private insurance by income and age. We show that older, higher-income people in working families are more likely to retain private coverage as premiums rise, and we project these effects on future coverage rates. The analysis suggests that trends are leading to the "graying" of the employment-based health insurance system, where older, higher-income people get private health insurance, and others increasingly have public coverage or go without. These changes raise questions about the private health care system's ability to pool health risks. Population aging could interact with rising premiums and place additional pressure on an already strained employment-based health insurance system.

Increasing health insurance costs and the decline in insurance coverage

OBJECTIVE

To determine the impact of rising health insurance premiums on coverage rates.

DATA SOURCES & STUDY SETTING

Our analysis is based on two cohorts of nonelderly Americans residing in 64 large metropolitan statistical areas (MSAs) surveyed in the Current Population Survey in 1989-1991 and 1998-2000. Measures of premiums are based on data from the Health Insurance Association of America and the Kaiser Family Foundation/Health Research and Educational Trust Survey of Employer-Sponsored Health Benefits.

STUDY DESIGN

Probit regression and instrumental variable techniques are used to estimate the association between rising local health insurance costs and the falling propensity for individuals to have any health insurance coverage, controlling for a rich array of economic, demographic, and policy covariates.

PRINCIPAL FINDINGS

More than half of the decline in coverage rates experienced over the 1990s is attributable to the increase in health insurance premiums (2.0 percentage points of the 3.1 percentage point decline). Medicaid expansions led to a 1 percentage point increase in coverage. Changes in economic and demographic factors had little net effect. The number of people uninsured could increase by 1.9-6.3 million in the decade ending 2010 if real, per capita medical costs increase at a rate of 1-3 percentage points, holding all else constant.

CONCLUSIONS

Initiatives aimed at reducing the number of uninsured must confront the growing pressure on coverage rates generated by rising costs.

Competition and Health Plan Performance

OBJECTIVE

We sought to assess whether health maintenance organizations (HMOs) operating in competitive markets, or markets with substantial HMO penetration, perform better on the standardized Health Plan Employer Data and Information Set (HEDIS) and Consumer Assessment of Health Plans Survey (CAHPS) measures.

STUDY DESIGN

We performed a secondary analysis of nonexperimental, cross-sectional data.

DATA SOURCES

Data were obtained from a variety of sources, including the National Committee for Quality Assurance (NCQA), Interstudy, the Area Resource File, the U.S. Office of Personnel Management, and the U.S. Department of Labor.

METHODS

Multiple Indicator Multiple Cause models were used to simultaneously estimate 6 latent quality variables from 35 HEDIS and CAHPS measures and to relate these latent variables to HMO competition and HMO penetration while controlling for other health plan and market characteristics.

PRINCIPAL FINDINGS

Greater competition, as measured by the Herfindahl index, was associated with inferior health plan performance on 3 of 6 quality dimensions. Plans in markets with greater HMO penetration perform better on HEDIS- but not CAHPS-based dimensions of performance. Plans that make their data available publicly perform significantly better on both the HEDIS and CAHPS domains, performing one third to three quarters of a standard deviation better than plans that don't make their results available publicly.

CONCLUSIONS

Plans in more competitive markets in 1999 did not achieve better quality after controlling for other important covariates, although plans in markets with a high degree of HMO penetration are performing better on the HEDIS quality dimensions. Although our study design cannot determine causality, the results suggest reason to revisit the belief that competition among HMOs will inherently improve quality.

Quality and employers' choice of health plans

We seek to understand the relationship between employer decisions regarding which health plans firms choose to offer to their employees and the performance of those plans. We measure performance using data from the Health Plan Employer Data Information Set (HEDIS) and the Consumer Assessment of Health Plan Survey (CAHPS). We use a unique data set that lists the Health Maintenance Organizations (HMOs) available to, and offered by, large employers across markets in the year 2000, and examine the relationship between plan offerings, performance measures and other plan characteristics. We estimate two sets of specifications that differ in whether they model plan choice as a function of absolute plan performance or plan performance relative to competitors. We find that employers are more likely to offer plans with strong absolute and relative HEDIS and CAHPS performance measures. Our results are consistent with the view that large employers are responsive to the interests of their employees.

Personalized targeted mailing increases mammography among long-term noncompliant medicare beneficiaries: a randomized trial

OBJECTIVES

The study purpose was to increase mammography screening among older women by identifying female Medicare beneficiaries without a recent mammogram and assesses the cost-effectiveness of a personalized targeted mailing encouraging them to have a mammogram.

METHODS

A randomized paired controlled trial included 1229 pairs of women matched on zip code, race, and urban or rural county. Postintervention mammography claims were measured from November 1997 through December 1998. The subjects were female Medicare beneficiaries age > or = 70, living in Michigan for > or = 5 years, having no significant comorbidity likely to affect screening, and no mammogram for > or = 5 years. Intervention subjects received a personally addressed letter from the Medical Director of Michigan Medicare with materials emphasizing the individual's lack of use of the Medicare mammography screening benefit, reasons for screening, and how to be screened.

RESULTS

Women who received the mailing were 60% more likely to have a subsequent mammogram (OR 1.6, P <0.005), with diagnostic mammograms increasing more than screening mammograms (2.8% vs. 0.8%). The absolute increase was greatest for women age 70 to 79, 10.6% in the intervention group versus 6.5% for controls, odds ratio 1.7 (P <0.02). A statewide Medicare intervention in Michigan would cost of 108,000 US dollars to 238,000 US dollars, producing 3500 to 4300 additional mammograms at 31 US dollars to 55 US dollars per additional mammogram.

CONCLUSION

The intervention increased mammography among long-term noncompliant older women, particularly increasing diagnostic mammograms. This approach can be directly implemented in other states and nationally. It may also be useful for other preventive services.

Titrating versus targeting home care services to frail elderly clients: an application of agency theory and cost-benefit analysis to home care policy

The article summarizes the shortcomings of current home care targeting policy, provides a conceptual framework for understanding the sources of its problems, and proposes an alternative resource allocation method. Methods required for different aspects of the study included synthesis of the published literature, regression analysis of risk predictors, and comparison of actual resource allocations with simulated budgets. Problems of imperfect agency ranging from unclear goals and inappropriate incentives to lack of information about the marginal effectiveness of home care could be mitigated with an improved budgeting method that combines client selection and resource allocation. No program can produce its best outcome performance when its goals are unclear and its technology is unstandardized. Titration of care would reallocate resources to maximize marginal benefit for marginal cost.

Approval Times For New Drugs: Does The Source Of Funding For FDA Staff Matter?

The Food and Drug Administration (FDA) has been criticized for injudicious and excessively rapid approval of new drugs as a result of pharmaceutical industry influence. Many critics focus on the Prescription Drug User Fee Act (PDUFA) of 1992, which augmented the FDA's budget through the charging of user fees. We assess the effect of FDA staffing patterns and attributes of submitting firms on approval times for 843 new drug applications (NDAs) submitted between 1977 and 2000. NDA review times shortened by 3.3 months for every 100 additional FDA staff. The amount of funding for FDA staff appears to be a much more important influence on NDA review time than the source of funding.

Medigap premiums and Medicare HMO enrollment

OBJECTIVE

Markets for Medicare HMOs (health maintenance organizations) and supplemental Medicare coverage are often treated separately in existing literature. Yet because managed care plans and Medigap plans both cover services not covered by basic Medicare, these markets are clearly interrelated. We examine the extent to which Medigap premiums affect the likelihood of the elderly joining managed care plans.

DATA SOURCES

The analysis is based on a sample of Medicare beneficiaries drawn from the 1996-1997 Community Tracking Study (CTS) Household Survey by the Center for Studying Health System Change. Respondents span 56 different CTS sites from 30 different states. Measures of premiums for privately-purchased Medigap policies were collected from a survey of large insurers serving this market. Data for individual, market, and HMO characteristics were collected from the CTS, InterStudy, and HCFA (Health Care Financing Administration).

STUDY DESIGN

Our analysis uses a reduced-form logit model to estimate the probability of Medicare HMO participation as a function of Medigap premiums controlling for other market- and individual-level characteristics. The logit coefficients were then used to simulate changes in Medicare participation in response to changes in Medigap premiums.

PRINCIPAL FINDINGS

We found that Medigap premiums vary considerably among the geographic markets included in our sample. Measures of premiums from different insurers and for different types of Medigap policies were generally highly correlated across markets. Our models consistently indicate a strong positive relationship between Medigap premiums and HMO participation. This result is robust across several specifications. Simulations suggest that a one standard deviation increase in Medigap premiums would increase HMO participation by more than 8 percentage points.

CONCLUSIONS

This research provides strong evidence that Medigap premiums have a significant effect on seniors' participation in Medicare HMOs. Policy initiatives aimed at lowering Medigap premiums will likely discourage enrollment in Medicare HMOs, holding other factors constant. Although the Medigap premiums are just one factor affecting the future penetration rate of Medicare HMOs, they are an important driver of HMO enrollment and should be considered carefully when creating policy related to seniors' supplemental coverage. Similarly, our results imply that reforms to the Medicare HMO market would influence the demand for Medigap policies.

Payer type and the returns to bypass surgery: evidence from hospital entry behavior

In this paper, we estimate the returns associated with the provision of coronary artery bypass graft (CABG) surgery, by payer type (Medicare, HMO, etc.). Because reliable measures of prices and treatment costs are often unobserved, we seek to infer returns from hospital entry behavior. We estimate a model of patient flows for CABG patients that provides inputs for an entry model. We find that FFS provides a high return throughout the study period. Medicare, which had been generous in the early 1980s, now provides a return that is close to zero. Medicaid appears to reimburse less than average variable costs. HMOs essentially pay at average variable costs, though the return varies inversely with competition.