Unbiased Analysis of Today's Healthcare Issues

Friday Links

Written By: Jason Shafrin - Aug• 08•14

Competition Works…even in Medicare Part D

Written By: Jason Shafrin - Aug• 06•14

This is the finding from a CBO working paper by Stocking et al. (2014). They use measure how plan bids change as the number of plans in an area change controlling for year, region, plan sponsor fixed effects, whether the plan was a Medicare Advantage Part D Plan (MA-PD), and whether the plan has a high share of low-income subsidy (LIS) beneficiaries. The authors find the following:

Consistent with economic theory, we find that increases in the number of plan sponsors within a market were associated with lower bids and lower overhead and profits of plans in that market. [A]mong stand-alone plans…each additional plan sponsor entering [a] market was associated with a reduction in bids…of 0.4 percent…which corresponds to an elasticity of -0.071….an additional plan sponsor nationwide was associated with a reduction in government spending of $7 million to $17 million each year.

However, these are only the average results. The authors also find that the size of the incumbant and the new entrants matter.

The bids of a larger “incumbent” plan that enrolls 5 percent of the regional beneficiary pool are less responsive (elasticity = -0.01) to changes in the number of plan sponsors than the bids of a smaller “fringe” plan that enrolls less than 0.25 percent (elasticity = -0.12).

Background on Medicare Part D

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CoR is up

Written By: Jason Shafrin - Aug• 06•14

The latest edition of the Cavalcade of Risk is up at Jaan Sidorov’s Population Health Blog. Check it out!

Why there are few entrepreneurs in the health care sector

Written By: Jason Shafrin - Aug• 05•14

 

Generally, health is just so heavily regulated. It’s just a painful business to be in. It’s just not necessarily how I want to spend my time. Even though we do have some health projects, and we’ll be doing that to a certain extent. But I think the regulatory burden in the U.S. is so high that think it would dissuade a lot of entrepreneurs.

 

Is the US health care spending slowdown real?

Written By: Jason Shafrin - Aug• 04•14

Between 2000 and 2007 annual health expenditures in the US grew by 6.6% per year. Between 2008 and 2011, however, the growth rate was only 3.3 percent per year. Are structural changes (e.g., the ACA) helping cause the slowdown?

According to Dranove et al. (2014), the answer is likely ‘no’. The authors use new data from the Health Care Cost Initiative (HCCI) which collects claims data from insurance companies such as Aetna, Humana, and UnitedHealthcare. Economic forces rather than structural changes in the healthcare system have lead to decelerating health care spending.

By exploiting regional variations in the severity of the slowdown, we determined that the economic slowdown explained approximately 70 percent of the slowdown in health spending growth for the people in our sample. This suggests that the recent decline is not primarily the result of structural changes in the health sector or of components of the Affordable Care Act, and that—absent other changes in the health care system—an economic recovery will result in increased health spending.

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Are you really disabled?

Written By: Jason Shafrin - Aug• 03•14

When the government extends benefits to individuals with specific characteristics (e.g., poverty, disability), the number of people who claim to have these characteristics will necessarily increase.  For instance, there are reports that unemployed individuals who no longer qualify for welfare are now moving onto the disability rolls in large numbers.  Are these people really disabled?

A recent study  by Gosling A., and Saloniki (2014) uses an approach developed by Bollinger (1996) to estimate the measurement error of disability rates in England.  The authors find that:

…a significant number of those with a disability fail to be recorded as such in the British Household Panel Survey. In addition, the probability of a false positive is estimated as being very close to zero in all socio-demographic groups. There is a strong bias in estimates of differences in rates of disability across groups but only a small effect on estimates of the difference in employment rates by disability status.

Like the US, the UK has a disability program known as the Personal Independence Payment. Thus, this study may indicate that most people who claim disability are “deserving” after all.

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Friday Links

Written By: Jason Shafrin - Jul• 31•14

How did Medicare pay for chemotherapy pre-2006?

Written By: Jason Shafrin - Jul• 30•14

A working paper by Jacobson et al. (2014) not only provides the answer, but describes how reimbursement policy change over the past decade.

Although Medicare did not offer a drug benefit for oral drugs (pills) until 2006, Medicare Part B, which covers physician services, has from inception covered physician-administered drugs such as IV chemotherapy, anti-nausea, and pain medicine used in cancer treatment. Rather than writing a prescription for these drugs that the patient fills at a pharmacy, the physician injects or infuses these drugs in an office or clinic and then bills Medicare for them.

The way CMS pays for these drugs, however, has changed over time. The Medicare Prescription Drug, Improvement and Modernization Act (MMA) of 2003 reduced reimbursement rates for these (Part B) drugs including oncology products.

Prior to the reform, Medicare reimbursed physicians and outpatient hospital clinics for these drugs as a percentage of the average wholesale price (AWP), a list price, published in several catalogues, that reflects neither wholesale nor average prices. From 1998 to 2003, reimbursements were 95% of AWP. To smooth the transition to a new payment system, the MMA reduced reimbursements to 85% of AWP in 2004…The reform replaced the AWP-based system with a new average sales price (ASP) payment system, whereby Part B drugs are reimbursed based on the national average of manufacturers’ sales prices, including rebates, from two quarters prior plus a 6% mark-up.

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Disparities in Schizophrenia Care

Written By: Jason Shafrin - Jul• 29•14

Do African Americans and Latinos receive the same quality care as Caucasians?  This is the question asked by Horvitz-Lennon et al. (2014).

Quality of Care

Before one can answer this question, one first has to define what “quality care” means.  The authors use the following definition for pharmacological indicators:

  • Any use of antipsychotic drugs,
  • Conditional on antipsychotic use, any use of long-acting injectable antipsychotics,
  • Two indicators of antipsychotic drug adherence (full adherence, defined as ≥80 percent medication possession ratio (MPR), and low adherence, defined as ≤50 percent MPR)
  • Two indicators of clozapine use (any clozapine use, and adequate duration and dose of clozapine treatment among users, defined as ≥90 days of clozapine use with a daily dose of ≥300 mg as of the 29th day of the trial),
  • Nonclozapine antipsychotic polypharmacy (simultaneous use of ≥2 nonclozapine antipsychotics for >90 days).

In addition to pharmaceutical treatment, the psychosocial indicators were as follows:

  • Any receipt of psychosocial services (at least once),
  • Routine receipt of psychotherapy (at least once every quarter).

The authors used the following appropriateness indicators:

  • Two indicators of continuity of care (follow-up care within 7 and 30 days of discharge from the first observed inpatient admission for schizophrenia),
  • Receipt of routine psychiatric services (any outpatient psychiatric service at least once every quarter),
  • Heavy use of Emergency Department (ED) services (≥4 ED visits with a primary diagnosis of schizophrenia),
  • Heavy use of inpatient services for schizophrenia (≥30 inpatient days or ≥3 inpatient admissions with a primary diagnosis of schizophrenia).

The authors also created a composite measure defined as follows:

The composite measure excluded three indicators initially considered for inclusion. These were adequate duration of clozapine treatment (90 or more days of clozapine use); above-range dose among maintenance users of first-generation antipsychotic (FGA) drugs (PORT-discordant dosing during a 3-month or longer period following the end of acute-phase treatment); and use intensity among users of psychosocial services (number of visits). We excluded the clozapine indicator because a more informative measure of clozapine treatment adequacy was included in the composite measure. We excluded the other two indicators because of small numbers.

Data

The authors used claims data from Medicaid Analytic eXtract (MAX) from four states: California, Florida, New York and North Carolina between 2002 and 2009 assembled as data. The specific MAX files used were Personal Summary, the source for eligibility and ICD-9 diagnoses; Inpatient; Pharmacy; and Other Services, the source for data on use of outpatient services.

Results

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What is Reference Pricing?

Written By: Jason Shafrin - Jul• 28•14

To reduce utilization of pharmaceutical products, many countries have opted to use reference pricing. Reference pricing is a system where patient coinsurance payments depend not only on the price of the drug but also the price of alternatives therapies.  As the name indicates, reference pricing sets patient coinsurance rates as the difference between the drug’s retail or list price and the price of the “reference” product.  Often a reference product will be a generic version of a product, or the most cost-effective molecule available in a class.  Patients pay some portion of the difference between the drug’s list price and the reference price.

For instance, consider the case where a Drug A $1000 per month, Drug R (the reference drug) costs $200, and patient coinsurance is 10% of any cost above the reference price.   In this example, the patient would pay $80/month [i.e., (1000-200)*.1] for the more expensive drug.

Reference pricing is widely used around the world.  After reference pricing was introduced in Germany in 1989, it spread quickly.  By 2010, 24 out of 32 EU countries used pharmaceutical reference pricing alone or in combination with other pharmaceutical price regulation policies. (see Pharmaceutical Health Information System website)
Although reference pricing is not popular in the U.S., the motivation behind reference pricing does influence commercial insurers copayment rates.  Commercial insurers will often place drugs into copayment tiers not only based on their cost and effectiveness but how these parameters vary relative to competitor therapies.

There are two types of reference pricing.  External reference pricing sets the reference price as a function of prices of substitute products in other countries; internal reference pricing sets the reference price as a function of prices of domestic substitutes.

A paper by Kaiser et al. (2014) examines how reference pricing is used in Denmark.

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