Unbiased Analysis of Today's Healthcare Issues

Smarter deductibles?

Written By: Jason Shafrin - Feb• 12•17

Are high deductible health plans a good thing?  Republicans typically argue yes as they say that increased cost sharing reduces moral hazard.  That is, when people have to pay for medical care out of pocket, they don’t ask for unnecessary care or use care more frugally.  Democrats typically argue that increased cost sharing reduces demand for effective health care, decreases medication adherence, and may even increase long-term cost if foregoing effective care results in higher downstream medical cost.

There is evidence for both arguments.  The RAND Health Insurance Experiment showed that people consume less health care when they have higher out-of-pocket cost.  A recent study by Wharam et al. (2017) found that low-income patients with high-deductible health plans did not use necessary health care and this resulted in a higher number of emergency department visits.

A commentary by Fendrick and Chernew (2017) argues for a “Precision Benefit Design”.  They propose a value-based insurance design (V-BID) which  would lower cost-sharing for high-value services and increase cost-sharing for low-value services.  They state that “In a nuanced design, cost sharing for eye examinations would be substantially lower for those with diabetes than for those without.”  The authors argue for pre-deductible coverage of high value services even for patients who have HDHP.   In fact, law has already been passed to facilitate this type of plan.

To better enable the synergies between value-based payment models and benefit designs, in July 2016, the bipartisan H.R. 5652 “Access to Better Care Act of 2016 ”was introduced. This bill givesHSA-qualified high-deductible health plans the ability to provide coverage for services that manage chronic disease prior to meeting the plan deductible.

While V-BID are good in theory, there are some issues in practice.  First, it is more complicated and expensive for plans to administer as deductibles will vary within a plan type depending on a person’s condition.  Second, it will be more difficult for patients to price compare across plans if deductibles and copayments routinely change each year depending on their health condition.  Third, V-BID will likely result in more paperwork and appeals regarding what constitutes high value care and who (and when) people are eligible for a cost sharing waiver.

Despite these challenges, reducing cost sharing for high-value treatments is an appealing approach.  The question to be answered will be whether these logistical challenges can be overcome.


Friday Links

Written By: Jason Shafrin - Feb• 10•17

The Price of Everything and the Value of Nothing

Written By: Jason Shafrin - Feb• 09•17

That is the title of an article in Eye for Pharma which interviews me about measuring value in health care.  The article highlights a number of issues related to value measurement, health policy and the healthcare marketplace. The article also describes the launch of the Innovation and Value Initiative, a broad coalition of providers, payers, patient advocates, scientists, researchers, and others who are dedicated to preserving innovation and enhancing value across the healthcare system.

Do check out the full article here.



How do payers use patient reported outcomes?

Written By: Jason Shafrin - Feb• 08•17

This is the question asked by a study conducted by Brogen et al. (2017).  To see how payers use patient reported outcomes (PRO) in oncology, the authors conducted a literatures search, and searched the websites of the following health technology assessment bodies:

  • Pharmaceutical Benefits Advisory Committee (PBAC) in Australia,
  • Canadian Agency for Drugs and Technologies in Health (CADTH),
  • Haute Autorité de Santé (HAS) in France
  • Institute for Quality and Efficiency in Health Care (IQWiG) in Germany,
  • Scottish Medicines Consortium (SMC),
  • National Health Service Scotland (NHS Scotland),
  • National Institute for Health and Care Excellence (NICE) in the UK,
  • Drug Effectiveness Review Project in the United States,
  • Agency for Healthcare Research and Quality (AHRQ) in the United States.

The authors also interviewed key stakeholders through an online survey and a one-on-one survey.

The literature review found that:

Of the 324 HTAs reviewed, 91 (28%) reported PRO data. The use of PRO data increased over time, from 11.1% in 2005 to 42.5% in 2011…Use of PRO data varied by HTA body, from 9.8% in HAS HTAs to 66.7% in HTAs by IQWiG and NHS Scotland.

The authors claim that much of the growing interest in PROs was driven by FDA guidance on PROs published in 2009.  In fact, more clinical trials are explicitly incorporating PROs as trial endpoints.

How do payers consider PROs in market access decisions?

Payer participants interviewed generally indicated that they consider PRO evidence in their decisions but that such evidence is usually considered complementary to clinical and safety endpoints. PRO evidence appears to have greater influence outside the United States: When asked whether PRO data affect decision making when one therapy is being considered over another, 47% of U.S. payers and 78% of ex-U.S. payers in the web-based survey indicated that PRO data have an impact.

Overall the authors found that some PROs are more likely to be used than others.  Specifically:

Characteristics of PRO data that maximize influence on payer decision making were reported to be (a) quality, well-controlled, and transparent PRO evidence; (b) psychometric validation of the PRO measure in targeted populations; and (c) publication in peer-reviewed journals.


The Changing US Health Insurance Market

Written By: Jason Shafrin - Feb• 07•17

An interesting paper by Graves and Nikpay (2017) look at the evoluation of the health insurance market before and after Obamacare.  The authors find

We found that the ACA’s unprecedented coverage changes increased transitions to Medicaid and nongroup coverage among the uninsured, while strengthening the existing employer-sponsored insurance system and improving retention of public coverage. However, our results suggest possible weakness of state Marketplaces, since people gaining nongroup coverage were disproportionately older than other potential enrollees.

The authors reach this conclusion using the 2011-2014 Medical Expenditure Panel Survey (MEPS) for individuals aged 18-63 years.

One interesting finding is that they observe little crowd-out overall.  A large share of the take-up of ACA plans was from the uninsured rather than individuals in employer-sponsored plans switching to the individual market.   Further, few people who had private insurance dropped this coverage for Medicaid after the Medicaid expansion. However, not everything comes up roses with respect to the exchanges.

Our results also highlight an enormous missed opportunity. We found that young adults were disproportionately more likely to transition from employer-sponsored insurance to uninsured status.Yet despite the availability of subsidized Marketplace coverage in 2014, the rates at which adults at all ages with employer coverage became uninsured did not change between 2012 and 2014.

The authors note that when individuals–particularly young adults–lose private health insurance due to employment termintation, it may be useful to highlight the benefits of the less costly (to the worker due to subsidies) insurance plans in the health insurance exchanges, as COBRA plans are typically very expensive for individuals.

Overall, the study does very nice job of showing how insurance transition states evolved before and after the implementation of the Affordable Care Act.  These statistics, however, may or may not be relevant depending on whether and how “repeal and replace” moves forward.


Medicare Advantage and Upcoding

Written By: Jason Shafrin - Feb• 06•17

Medicare’s cost are growing due to an aging population, technological advances, and other factors.  One of those factors may be upcoding that is occurring among Medicare Advantage plans.  Rick Kronick writes in Health Affairs that:

Over the past decade, the average risk score for Medicare Advantage (MA) enrollees has risen steadily relative to that for fee-for-service Medicare beneficiaries, by approximately 1.5 percent per year. The Centers for Medicare and Medicaid Services (CMS) uses patient demographic and diagnostic information to calculate a risk score for each beneficiary, and these risk scores are used to determine payment to MA plans. The increase in relative MA risk scores is largely the result of successful efforts by MA plans to identify additional diagnoses, also known as coding intensity, and not of changes in enrollees’ true health. In this article I estimate the effects of coding intensity on Medicare spending over the next decade. Under the moderately conservative assumption that coding intensity will decelerate, Medicare expenditures are expected to increase by approximately $200 billion.

How does Dr. Kronick propose to fix this issue?

The problem could be largely solved if CMS adjusted for coding intensity using the principle that MA beneficiaries are no healthier and no sicker than demographically similar fee-for-service Medicare beneficiaries, returning to the budget-neutrality approach that was introduced in 2004 and later abandoned.

This approach is clearly not the theoretically correct answer, but could be a practical solution.  It is very unlikely that MA beneficiaries are “no healthier and no sicker” then demographically similar fee-for-service beneficiaries.  A first-best solution clearly would aim to accurately capture these differences and use risk adjustment to ensure reimbursement is tied to disease severity.

However, in a world with up-coding, coding accuracy may vary systematically between Medicare FFS and MA as only for the later does reimbursement depend on patient severity.  In other words, in the MA case, disease severity is not an exogenous factor.

It is likely the case that MA patients are in general healthier than patients in FFS Medicare.  Thus, Kronick’s approach would be conservative (from the perspective of MA plans) since he would set reimbursement at parity.


What is the value of a QALY?

Written By: Jason Shafrin - Feb• 05•17

Many new treatments deliver significant benefits to patients.  In many cases, however, the new treatments may be more expensive.  How do we know if a treatment is worth the cost?

Cost effectiveness analysis helps us answer this question.  Cost is fairly easy to calculate but benefits are more complicated.  A treatment could extend a person’s life with no change in morbidity while alive, another treatment could improve morbidity but not mortality, or a third treatment could do both.  The concept of quality-adjusted life years (QALY) is often used to summarize a treatment’s overall benefits.  Cost effectiveness research often measures the incremental cost effectiveness ratio (ICER) relative to the standard of care.

A separate question is, what happens once you know the value of an ICER?  Some payers–particularly public payers in Europe–use the ICER to determine coverage decisions.  In the US, some organizations–of particular note, an organization named the Instituted for Clinical and Economic Review (aka ICER)–use cost effectiveness thresholds to argue for increased price discounts.

But what is the right cost effectiveness threshold?  A paper by Nanavaty et al. (2015) aims to discuss some of the limitations of the current ICER thresholds used. They claim that:

  • Some ICER threshold are out of date. They claim that some cost effectiveness thresholds are out of date, as some ICER threshold were established as long ago as 1982.  Some countries do use a “dynamic” ICER threshold (e.g., Australia, Canada, Netherlands, and New Zealand) that may be updated over time but others (United Kingdom, United States) do not.
  • ICERs thresholds may not account for non-monetary benefits.  Some components include “…the extent to which the treatment is addressing previously unmet needs, the severity of disease treated by the treatment, and the population size to be impacted by the new treatment.”
  • ICER thresholds vary widely across countries.  Looking at a number of developed countries, ICER thresholds ranged from $13,000 (New Zealand) to $104,000 (Canada) after converting to USD.
  • Within country, there is variation in the ICER threshold.  For instance, in the UK there is an  initiative to evaluate life-extending technologies through an elaborate set of “end-of-life” criteria.  For these end-of-life treatments, NICE says it will consider treatments with ICERs above £30,000.

So what do we make of this variability.  Nanvaty et al. summarizes their findings as follows:

The £20,000-30,000 per QALY threshold currently used in the UK was established in 1999 and has no reported basis.27,28 The absence of a justification for the arbitrarily set thresholds likely stemmed from the lack of policy related decision-making context or precedent at that time. Currently, adjustments to account for inflation, innovation, increasing cost of research and development, satisfying unmet needs, or for severe diseases, may not be adequately addressed. Our findings were comparable to those by Claxton and associates, who used a similar targeted literature review approach, although they focused on NICE and implications for the National Health Service.

The authors state that there is some evidence that an ICER threshold of more than $200,000 per QALY is supported.  Regardless, if coverage decisions are being made on this threshold, additional research is needed to better hone in on that right threshold for a given society.



Written By: Jason Shafrin - Feb• 02•17

End of Life decisions

Written By: Jason Shafrin - Feb• 01•17

Netflix has a very interesting documentary on end of life decisions.  Do you put your loved one on a ventilator, extend their life, but perhaps increase their suffering?  Or do you let nature take its course, but potentially lose time you could have with your loved one.  These are not easy decisions and one that the documentary Extremis tackles head on.  The film was nominated for an Academy Award for best short documentary and the trailer is below.


The last Obamacare sign up?

Written By: Jason Shafrin - Jan• 31•17

Today is the last day to sign up for Obamacare for 2017.  If President Trump has his way, it could be the last day to sign up for Obamacare ever.  In fact, Marketplace reports that

Trump administration decided to pull ads promoting last-minute sign-ups, although it reversed that decision shortly after.

The media put forth mixed estimates of the degree to which a potential Trump repeal of Obamacare has affected sign-ups.  On the one hand, people worried that this is their last chance to sign up, may rush to get Obamacare coverage before it is repealed.  In fact, NPR reports the following:

“Our volume has been the same as it has been in past years,” [Katie Nicol, a senior manager who oversees the five so-called navigators’ said.

That tracks with the latest numbers released by the Department of Health and Human Services. As of Jan. 14, 8.8 million people had signed up for coverage — slightly more than last year.

On the other hand, few people will want to sign up for an insurance plan that may be eliminated just a few months from now.  The Washington Post reports:

As of Monday, grass-roots Get Covered America groups in three-dozen states had 30 percent fewer consumers requesting online appointments to get assistance in choosing health plans compared with a year ago, according to the nonprofit organization Enroll America.

We’ll see what the final numbers say, but the only thing certain for 2018 is that Obamacare–and health care more generally–will not stay the same.