The Impact of Sharing Drug Rebates at the Point of Sale on Out-of-Pocket Payments for Enrollees in Employer-Sponsored Insurance

ObjectivesThis study aimed to estimate the impact of sharing drug rebates at the point of sale on out-of-pocket spending by linking estimated rebates to administrative claims data for employer-sponsored insurance enrollees in 2018.MethodsWe applied the drug rebate rate to the retail price of each brand name drug fill, allocated the reductions to out-of-pocket spending based on cost-sharing provisions, and aggregated each individual’s out-of-pocket spending across drug fills. We assumed that generic drugs have no rebates for employer-sponsored insurance. We assessed the impact of sharing rebates at the point of sale on out-of-pocket spending overall, for the therapeutic classes and specific drugs with the highest average out-of-pocket spending per user, and by health plan type.ResultsAcross 4 simulations with different assumptions about the degree of cross-fill effects, we found that 10.4% to 12.2% of enrollees in our sample would have realized savings on out-of-pocket spending if rebates were shared to the point of sale. Among those with savings, approximately half would save $50 or less, and 10% would save > $500 annually. We calculated that a premium increase of $1.06 to $1.41 per member per month among the continuously enrolled, insured population would be sufficient to finance the out-of-pocket savings in our sample.ConclusionsOur study suggests that, for a small percentage of enrollees, sharing drug rebates at the point of sale would likely improve the affordability of high-priced brand name drugs, especially drugs that face significant competition.     

A decade of health care cost growth has wiped out real income gains for an average US family

Although a median-income US family of four with employer-based health insurance saw its gross annual income increase from $76,000 in 1999 to $99,000 in 2009 (in current dollars), this gain was largely offset by increased spending to pay for health care. Monthly spending increases occurred in the family's health insurance premiums (from $490 to $1,115), out-of-pocket health spending (from $135 to $235), and taxes devoted to health care (from $345 to $440). After accounting for price increases in other goods and services, the family had $95 more in monthly income to devote to nonhealth spending in 2009 than in 1999. By contrast, had the rate of health care cost growth not exceeded general inflation, the family would have had $545 more per month instead of $95-a difference of nearly $5,400 per year. Even the $95 gain was artificial, because tax collections in 2009 were insufficient to cover actual increases in federal health spending. As a result, we argue, the burdens imposed on all payers by steadily rising health care spending can no longer be ignored.     

The demand for episodes of treatment in the health insurance experiment

This paper analyzes claims data from the RAND Insurance Experiment, which were grouped into episodes of treatment. The insurance plans in the experiment have coinsurance and a cap on out-of-pocket spending. Using new statistical techniques to adjust for the increased sickliness of those who exceed the cap, the effects of coinsurance on cost per episode and number of episodes are estimated. Cost sharing reduced the number of episodes but had little effect on cost per episode. People in the experiment responded myopically as their current insurance status changed through the year. The price elasticity of spending was about -0.2 throughout the range of coinsurance studied. When data permit it, the study of episodes complements analyses of annual medical spending by revealing more about how decisions to spend are made within the year.     

Cost Sharing and Utilization of Postpartum Intrauterine Devices and Contraceptive Implants Among Commercially Insured Women

BackgroundCost sharing may impede postpartum contraceptive use. We evaluated the association between out-of-pocket costs and long-acting reversible contraceptive (LARC) insertion among commercially insured postpartum women.MethodsUsing the Clinformatics Data Mart, we examined out-of-pocket costs for LARC insertions at 0 to 3 and 4–60 days postpartum among women in employer-sponsored health plans from 2013 to 2016. Patient costs were estimated by summing copayment, coinsurance, and deductible payments for LARC services (device + placement). Multivariable logistic regression evaluated the association between plan cost sharing for LARC services (at least one beneficiary with >$200 cost share) and LARC insertion by 60 days postpartum (yes/no).ResultsWe identified 396,073 deliveries among women in 51,797 employer-based plans. Overall, LARC placement by 60 days postpartum was observed after 5.2% (n = 20,604) of deliveries. Inpatient LARC insertion (n = 233; 0.06% of deliveries) was less common than outpatient LARC insertion (n = 20,375; 5.14% of deliveries). Cost sharing was observed in 23.4% of LARC insertions (inpatient IUD: median, $50.00; range, $0.93–5,055.91; inpatient implant: median, $11.91; range, $2.49–650.14; outpatient IUD: median, $25.00; range, $0.01–3,354.80; outpatient implant: median, $27.20; range, $0.18–2,444.01). Among 5,895 plans with at least one LARC insertion and after adjusting for patient age, poverty status, race/ethnicity, region, and plan type, women in plans with cost sharing of more than $200 demonstrated lower odds of LARC use by 60 days postpartum (odds ratio, 0.74; 95% confidence interval, 0.71–0.77).ConclusionsCost sharing for postpartum LARC is associated with use, suggesting that out-of-pocket costs may impede LARC access for some commercially insured postpartum women. Reducing out-of-pocket costs for the most effective forms of contraception may increase use.     

Price elasticities of pharmaceuticals in a value based‐formulary setting

Empirical estimates of price elasticities of demand (PED) for pharmaceuticals suggest that they are relatively price inelastic. However, in many settings, a medication and its substitutes and complements face simultaneous differential changes in prices that affect the observed “composite” PED. We exploit an implementation of a value‐based formulary (VBF) that utilized drug‐specific incremental cost‐effectiveness ratios (ICERs) to inform drug copayments, resulting in increases in copayments for some medications and decreases in copayments for others. We first show theoretically that by changing the price of a medication and its substitute in opposite directions, VBF designs can leverage cross‐price effects to increase the range of composite PEDs. We then empirically estimate PED and welfare effects using a consumer surplus approach. Overall PED was ?0.16, similar to the RAND Health Insurance Experiment estimate. However, there was substantial dispersion of PED across the VBF copayment tiers ranging from ?0.09 to ?0.87 with a statistically significant trend aligned with the levels of value as reflected by the ICER estimates (p < 0.001). The net welfare increase was $147,000 for the cohort or $28 per member over the postpolicy year. Further experimentations of VBF designs with alternative cost‐effectiveness thresholds, copayment levels and value definitions could be quite promising for improving welfare.     

The effect of three-tier formulary adoption on medication continuation and spending among elderly retirees

OBJECTIVE: To assess the effect of three-tier formulary adoption on medication continuation and spending among elderly members of retiree health plans. DATA SOURCES: Pharmacy claims and enrollment data on elderly members of four retiree plans that adopted a three-tier formulary over the period July 1999 through December 2002 and two comparison plans that maintained a two-tier formulary during this period. STUDY DESIGN: We used a quasi-experimental design to compare the experience of enrollees in intervention and comparison plans. We used propensity score methods to match intervention and comparison users of each drug class and plan. We estimated repeated measures regression models for each class/plan combination for medication continuation and monthly plan, enrollee, and total spending. We estimated logit models of the probability of nonpersistent use, medication discontinuation, and medication changes. DATA COLLECTION/EXTRACTION METHODS: We used pharmacy claims to create person-level drug utilization and spending files for the year before and year after three-tier adoption. PRINCIPAL FINDINGS: Three-tier formulary adoption resulted in shifting of costs from plan to enrollee, with relatively small effects on medication continuation. Although implementation had little effect on continuation on average, a small minority of patients were more likely to have gaps in use and discontinue use relative to comparison patients. CONCLUSIONS: Moderate cost sharing increases from three-tier formulary adoption had little effect on medication continuation among elderly enrolled in retiree health plans with relatively generous drug coverage.     

Health care expenditures among working-age adults with physical disabilities: Variations by disability spans

BackgroundData on health care costs for working-age adults with physical disabilities are sparse and the dynamic nature of disability is not captured.ObjectivesTo assess the effect of 3 types of disability status (persistent disability, temporary disability, and no disability) on health care expenditures, out-of-pocket (OOP) spending, and financial burden.MethodsData from Medical Expenditure Panel Survey panel 12 (2007–2008) were used. Respondents were classified into 3 groups. Medians of average annual expenditures, OOP expenditures, and financial ratios were weighted. The package R was used for quantile regression analyses.ResultsFifteen percent of the working-age population reported persistent disabilities and 7% had temporary disabilities. The persistent disability group had the greatest unadjusted annual medians for total expenditures ($4234), OOP expenses ($591), and financial burden ratios (1.59), followed by the temporary disability group ($1612, $388, 0.71 respectively). The persistent disability group paid approximately 15% of total health care expenditures out-of-pocket, while the temporary disability group and the no disability group each paid 22% out-of-pocket. After adjusting for other factors, quantile regression shows that the persistent disability group had significantly higher total expenditures, OOP expenses, and financial burden ratios (coefficients 1664, 156, 0.58 respectively) relative to the no disability group at the 50th percentile. Results for the temporary disability group show a similar trend except for OOP expenses.ConclusionsPeople who have disabling conditions for a longer period have better financial protection against OOP health care expenses but face greater financial burdens because of their higher out-of-pocket expenditures and their socioeconomic disadvantages.     

An equitable way to pay for universal coverage.

This article describes a way to finance universal health care coverage that preserves much of the current financing system and replaces funds obtained from regressive sources with revenue from more progressive ones. New funding would be needed for 24 percent of health expenditures and would be raised through an increase in the federal personal income tax. Premiums are eliminated since their cost is the same to everyone regardless of income. Cost sharing and out-of-pocket spending for medically necessary services are also abolished. In a more equitably financed system, employers would pay a new payroll tax that raised the same amount of money they currently spend for employee health insurance premiums; this would require a payroll tax of about 7 percent. Revenue from an increase in federal personal income taxes would replace household out-of-pocket expenditures for medically necessary services and payments for insurance premiums. For the average, middle-income family, the tax increase would total $731 in 1998. In exchange for the tax increase, no American or American employer would need to buy health insurance or face out-of-pocket charges for any medically indicated health care.     

Individual insurance benefits to be available under health reform would have cut out-of-pocket spending in 2001-08

Under the Affordable Care Act, individual health insurance will probably become more generous and more like employment-related insurance. Currently, individual insurance typically has less generous benefits than employment-related insurance. This study compared out-of-pocket spending on health care between individual and employment-related insurance, controlling for numerous characteristics such as health status. Then it simulated the impact of full implementation of provisions of the Affordable Care Act on adults who currently have individual insurance, including important subgroups-adults with chronic conditions, the near-elderly (ages 55-64), and low-income populations. If adults who had individual insurance during 2001-08 had instead had benefits similar to those under the Affordable Care Act, their average annual out-of-pocket spending on medical care and drugs might have been $280 less. The near-elderly and people with low incomes might have saved $589 and $535, respectively. An important improvement would have been the reduced probability of incurring very high out-of-pocket spending. The likelihood of having out-of-pocket expenditures on care exceeding $6,000 would have been reduced for all adults with individual insurance, and the likelihood of having expenditures exceeding $4,000 would have been reduced for many.     

Effects of cost sharing on physician utilization under favourable conditions for supplier-induced demand

The effects of cost sharing on the demand for ambulatory care in experimental circumstances are well understood since the Rand Health Insurance Experiment (HIE). However, in a non-experimental real-world context, supplier-induced demand of doctors might erode some of the significant negative out-of-pocket price elasticity identified in the HIE. Belgium is an interesting test case for this hypothesis because it has relatively high rates of patient cost sharing in its public health insurance system and a very high density of physicians, all remunerated fee-for-service. We have exploited the price variation generated by a substantial increase in patient co-payment rates in 1994 to estimate out-of-pocket price elasticities for three groups of users, and for three types of services using a fixed-effects model in levels and in differences. We obtain significant out-of-pocket price elasticities for the general population in the range from -0.39 to -0.28 for GP home visits, -0.16 to -0.12 for GP office visits and -0.10 for specialist visits. The estimates were generally lower and less significant for the groups of elderly and disabled. The differences we find in price responsiveness appear to be fairly robust and consistent with the HIE predictions. These results suggest that--at least in the short run--non-experimental utilization effects of cost sharing are very similar to the experimental evidence, even in a situation of favourable conditions for supplier-induced demand.     

Benefit design and specialty drug use

In this paper we examine spending by privately insured patients with four conditions often treated with specialty drugs: cancer, kidney disease, rheumatoid arthritis, and multiple sclerosis. Despite having employer-sponsored health insurance, these patients face substantial risk for high out-of-pocket spending. In contrast to traditional pharmaceuticals, we find that specialty drug use is largely insensitive to cost sharing, with price elasticities ranging from 0.01 to 0.21. Given the expense of many specialty drugs, care management should focus on making sure that patients who will most benefit receive them. Once such patients are identified, it makes little economic sense to limit coverage.     

The Effect of Health Plan Characteristics on Medicare+Choice Enrollment

Objective. To provide national estimates of the effect of out-of-pocket premiums and benefits on Medicare beneficiaries' choice among managed care health plans.
Data Sources/Study Setting. The data represent the population of all Medicare+Choice (M+C) plans offered to Medicare beneficiaries in the United States in 1999.
Study Design. The dependent variable is the log of the ratio of the market share of the j th health plan to the lowest cost plan in the beneficiary's county of residence. The explanatory variables are measures of premiums and benefits in the j th health plan relative to the premiums and benefits in the lowest cost plan.
Data Collection Methods. The data are from the 1999 Medicare Compare database, and M+C enrollment data from the Centers for Medicare and Medicaid Services (CMS).
Principal Findings. A $10 increase in an M+C plan's out-of-pocket premium, relative to its competitors, is associated with a decrease of four percentage points in the j th plan's market share (i.e., from 25 to 21 percent), holding the premiums of competing plans constant.
Conclusions. Although our price elasticity estimates are low, the market share losses associated with small changes in a health plan's premium, relative to its competitors, may be sufficient to discipline premiums in a competitive market. Bidding behavior by plans in the Medicare Competitive Pricing Demonstration supports this conclusion.     

Anticipated Impact of Generic Imatinib Market Entry on the Costs of Tyrosine Kinase Inhibitors

Background

Imatinib was the first BCR-ABL tyrosine kinase inhibitor (TKI) approved in the United States for the treatment of patients with chronic myelogenous leukemia and is currently the most prescribed TKI. The impending loss of patent exclusivity for imatinib has the potential to reduce costs for payers.

Objective

The primary objectives of this study were to estimate the economic impact of the loss of patent exclusivity for branded imatinib and to calculate the relative impact of requiring prior authorization (PA) for the use of generic imatinib before a branded TKI. The secondary objective was to evaluate the potential relative cost impact of using a preferred branded TKI in addition to the PA requirement for generic imatinib before a branded TKI.

Methods

A Microsoft Excel–based model was developed from the perspective of a US payer (commercial and Medicare) for a 2-year period. Data on utilization, patient out-of-pocket cost, and market share were obtained from an analysis of Truven Health MarketScan claims. It was assumed that the cost of generic imatinib would be 47.8% of the price of branded imatinib. It was assumed that 70% of patients receiving branded imatinib would shift to generic imatinib in year 1, and 95% would shift in year 2 after loss of patent exclusivity. Formulary management could be applied through PA requiring the use of generic imatinib before a branded TKI for patients newly prescribed TKI therapy. It was assumed that 74% of PA requests would be approved, and that the administrative cost of each would be $20.

Results

In a hypothetical 1 million member commercial plan, the loss of patent exclusivity for branded imatinib produced cost-savings of $6.8 million during 2 years, or 28.8% of the total pharmacy spending on the TKI class. The savings were even greater in a 1 million member Medicare plan, at $22.9 million (28.8%). Formulary management reduced incremental TKI spending by 1.1% and 2.2% for the commercial and Medicare plans, respectively.

Conclusions

In the absence of formulary management beyond generic substitution, the loss of patent exclusivity for branded imatinib is expected to reduce total pharmacy spending on TKIs by nearly 33% during 2 years. Given the small number of newly treated patients, formulary management of the TKI class through restricted access to branded imatinib, with or without a preferred branded TKI, has limited potential for incremental cost-savings.     

Patient–Provider Discussion About Cancer Treatment Costs and Out-of-Pocket Spending: Implications for Shared Decision Making in Cancer Care

ObjectivesPatient–provider discussion about treatment costs has been recognized as a key component of shared clinical decision making in cancer care. This study examined the association of patient–provider cost discussion with out-of-pocket spending among cancer survivors.MethodsUsing data from the 2016-2017 Medical Expenditure Panel Survey-Experiences with Cancer Survivorship Supplement, cancer survivors in the United States who reported having a detailed discussion about treatment costs were identified. Multivariable generalized linear model with gamma distribution and log-link was fitted to analyze average total out-of-pocket spending between those who had the discussion and those who did not. We also examined whether having the cost discussion is associated with the likelihood of reporting receipt of all cancer care they believed was necessary using a multivariable logistic regression model. All analyses controlled for patient socioeconomic and health-related characteristics.ResultsAmong 1525 individuals, representing 14.6 million cancer survivors in the United States (mean age, 65.5 years; 59% women; 80.4% white), only 10.4% (95% confidence interval [CI], 8.7%-12.1%) reported having the detailed cost discussion with their providers during their cancer care. Having a cost discussion was associated with a −33.8% reduction in (95% CI, −38.2% to −29.6%; an absolute difference of −$478) average total out-of-pocket spending. The probability of receiving all necessary patient-reported cancer care was not different between those who had the discussion and those who did not.ConclusionDetailed patient–provider cost discussions were associated with lower average total out-of-pocket spending. Patients who had detailed cost discussions with providers did not seem to sacrifice the appropriate utilization of necessary cancer treatments.     

Health benefits of reduced patient cost sharing in Japan

Objective

To assess the effect on out-of-pocket medical spending and physical and mental health of Japan’s reduction in health-care cost sharing from 30% to 10% when people turn 70 years of age.

Methods

Study data came from a 2007 nationally-representative cross-sectional survey of 10 293 adults aged 64 to 75 years. Physical health was assessed using a 16-point scale based on self-reported data on general health, mobility, self-care, activities of daily living and pain. Mental health was assessed using a 24-point scale based on the Kessler-6 instrument for nonspecific psychological distress. The effect of reduced cost sharing was estimated using a regression discontinuity design.

Findings

For adults aged 70 to 75 years whose income made them ineligible for reduced cost sharing, neither out-of-pocket spending nor health outcomes differed from the values expected on the basis of the trend observed in 64- to 69-year-olds. However, for eligible adults aged 70 to 75 years, out-of-pocket spending was significantly lower (P < 0.001) and mental health was significantly better (P < 0.001) than expected. These differences emerged abruptly at the age of 70 years. Moreover, the mental health benefits were similar in individuals who were and were not using health-care services (P = 0.502 for interaction). The improvement in physical health after the age of 70 years in adults eligible for reduced cost-sharing tended to be greater than in non-eligible adults (P = 0.084).

Conclusion

Reduced cost sharing was associated with lower out-of-pocket medical spending and improved mental health in older Japanese adults.     

Trends in out-of-pocket spending by insured American workers, 1990-1997

This paper examines trends in out-of-pocket spending for insured workers from 1990 to 1997. Data are from the Consumer Expenditure Survey conducted by the U.S. Bureau of Labor Statistics. The survey collects detailed quarterly data on all consumer spending from logs kept each year by more than 10,000 households with job-based health insurance. During the study period, total out-of-pocket spending in constant dollars remained unchanged. Spending for medical expenses, drugs, and supplies declined by 23 percent, but this decline was offset by rising employee contributions for health insurance premiums. The shift to managed care, whose benefit structure requires less cost sharing, may have played a role in reducing out-of-pocket spending.