Anderson On Health Insurance

Just a reminder, Open Enrollment for the ACA has its first big deadline at 11:59PM local time on December 15th. Individuals who choose their plans before that time will have their policies go live on January 1, 2025. Individuals in all states other than Idaho will have Open Enrollment Periods extend to January 15, 2025.

Even if you like your policy this year, go in and check things out. Your networks might change, your premium subsidy likely changes (work under review right now), and your options might change. Spend 20-30 minutes confirming that this hugely consequential decision is still a decent one.

ACA Open Enrollment ReminderPost + Comments (7)

A fragmented system with strong incentives to play hot potato and then screen and select patients facing a fairly consolidated market sector (hospitals) is really expensive with lots of administrative overhead.

WOW — this is usually the second, or perhaps the third lecture in any Intro to the US Healthcare System course.

Health insurance administrative costs are indeed much higher in the U.S. than in other countries. That’s driven primarily by private insurance. In traditional Medicare, administrative costs are 1.3% of total spending.

www.kff.org/medicare/iss…

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— Larry Levitt (@larrylevitt.bsky.social) December 6, 2024 at 10:57 AM

Stoned sophomores running the governmentPost + Comments (24)

In a recent Journal of Managed and Specialty Pharmacy, Tadrous et al examine what types of drugs are available in the US but are not available in Canada.  We pay substantially higher prices and this might lead to more or better drugs becoming available in the US earlier/ever.  That is a very reasonable question.  Paying more to get something better and faster is not a crazy idea

 After exclusions, there were 399 drugs; 120 (30%) were “cancelled post-market,” 38 (10%) were “dormant; approved but not marketed; cancelled pre-market,” 49 (12%) were “formulation unavailable,” 130 (33%) were “existing drug class,” 35 (9%) were “therapeutically similar,” 3 (1%) were “preapproval,” 15 (4%) were “atypical access available,” and 9 (2%) were “unavailable” in Canada. 6 of the 9 drugs had been evaluated by 1 or more independent organizations, and all 6 were rated as offering minor to no additional therapeutic value compared with existing drugs…

The therapeutic value of drugs in the “unavailable without alternatives marketed” category was determined by searching the databases of 3 organizations that evaluate the efficacy and safety of new drugs… The therapeutic value of the remaining 3 has yet to be given an ordinal therapeutic rating by the 3 organizations that we consulted….

 

So what are we paying for?

High drug prices for what?Post + Comments (16)

I’m working on an ACA/Silverloading manuscript this morning.  I think I will be able to write that sentence for at least another decade.  The big question that we’re poking at in this manuscript is how does Silverloading change the pricing dynamics from the insurers’ points of view.  My co-authors and I all agree that weird game theory happens.  I am trying to think my way through the problem and as I’m thinking about it, I wanted to pull up my first attempt at thinking through the problem from Spring 2017:

Anthem seems to be allocating all of the cost of the CSR non-payment only to Silver plans. Bronze, Gold and Platinum plans will be priced on medical trend only.

This is interesting as it opens up the potential for some very odd games. We need two cases.

The first case is if not all carriers use the same assumptions. I am assuming the prices of the carriers in a non-sabotage world would be converging as my baseline counterfactual. We’ll keep the world simple and just assume two carriers in a pricing region. I think the analysis logically expands to more than two carriers.

If one carrier elects to spread the cost of CSR throughout the entire product line and one carrier elects to concentrate the price increase in Silver, the spreader most likely captures the least expensive Silver plan. They are adding 10%-20% of premium to their non-sabotage Silver premiums. The concentrated Silver needs to add enough premium between 15% to 20% actuarial value which with induced demand factors probably means a premium increase of 25% to 30% over their non-sabotaged Silver plans. If each company only offers a single silver plan, there is a large silver gap and there are great deals for buyers of the spread Silver. Most likely the spread Silver company captures most of the CSR Silver market.

Odd things happen in other bands. The concentrated Silver has a massive price advantage on their Bronze plan as they add in no sabotage premium increase. The spread Silver plan has to add in a significant bump to their Bronze plans. And since there is a large Silver spread between the benchmark and the low cost Bronze plans, these plans will be very attractive to non-CSR eligible individuals. The same dynamic will occur at Gold. There is a decent chance the concentrated Silver Gold plan will cost less than their Gold plan and may be near the spread Silver’s premium.

I think in a situation where there is a split actuarial assumption on how to distribute the costs of non-payment of CSR, the company that spreads the cost over all metal bands will get almost all of the 100-150% Federal Poverty Line (FPL) Silver purchases, most of the 150-200% FPL CSR Silver purchases and very little else. The concentrated Silver carrier will get almost all of the people who would have otherwise bought the Silver 200-250% FPL CSR Silver as Gold buyers, and then pick up most of the Bronze, Gold and Platinum buyers.

I’m sort of identifying a Silverload vs. Broadload game here although those two terms were not invented for another few months. If there is a split in how costs for CSR benefits are attributed to different metal levels and somewhat similar pricing structures, there are points were different insurers are competing for very different market segments. I think this still makes at least directional sense.

The next scenario is if all carriers in a rating region adopt the Anthem assumption that their Silver premium contains the entire CSR sabotage price as an actuarial value adjustment….
Effectively Bronze plans in most counties will be low to no cost for most buyers who earn under 400% FPL. Weak gold plans (76%-80% AV) will be priced for subsidized individuals as if they are Bronze plans today. Platinum plans will have relative prices as if they are Gold plans today.

If every carrier in a region prices on the assumption that Wesley thinks Anthem is making, the average actuarial value of plans purchased on Exchange will increase significantly for everyone but for 100-200% FPL CSR Silver buyers. They will be getting the same (87% or 94%) actuarial value as before with perhaps some of the 150% to 200% FPL buyers choosing to buy down to a Gold to take a larger out of pocket in exchange for a lower monthly post-subsidy premium or buying up to Platinum for a small increase for less out of pocket.

I don’t think I quite got this one right as the Two Margin Problem suggests a much larger move to Bronze than I thought and I got the risk adjustment/competition incentives wrong on Silver pricing near Platinum instead of near Gold.

Silverloading game theory (revisited)Post + Comments (11)

In a recent article in the Journal of Managed Care Pharmacy, Niu et al analyze the increasing concentration of spending in Medicare Part D among a few select classes of drugs.  In 2012, the Top 1% of drugs made up just over 31% of total spend while in 2021, that same Top 1% of drugs made up 41% of total spend despite having a lower share of prescriptions.  Cutting the data by the Top 5% and Top 10% show directionally similar trends.

 

Why does this matter?

In Medicare Part D pre-Inflation Reduction Act, the federal government paid the overwhelming majority of the “catastrophic” costs of the top 1%. Insurers paid a small chunk through premium revenue. The IRA, effective 1/1/25 flips this. The insurer now covers most of the catastrophic costs which is funded by higher premiums while the federal government takes on a fraction of the catastrophic costs.

This article shows (as many others have) that the truly catastrophic costs are a growing share of total costs.  Changing who is responsible for these costs will change the shape of the Part D program and insurers that have a large number of people with catastrophic costs will have very strong incentives/reasons to run like hell from those enrollees.

Drug spending concentration over a decadePost + Comments (5)

As the baby boom generation enters its prime years for long-term care needs, its difficult to come up with a more challenging backdrop than an immigration system about to be cut off at its knees (think: nursing home aides) and states having to fill in funding gaps from Medicaid spending shortfalls.

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— John Graves (@johngraves.bsky.social) November 25, 2024 at 2:33 PM

I’m not sure how to get even more bummed this morning then trying to think through this problem.

Okay Boomers — how does this WORK?Post + Comments (127)

Earlier this month a team lead by Dr. Kelly Anderson of the University of Colorado (disclosures at the end) published an article in big JAMA looking at anti-convulsant drug use among Colorado residents who had their primary pharmacy closed relative to Colorado residents who did not have their primary pharmacy closed.

There were three basic stories that we could have anticipated ahead of time:

1) No big deal — people could move their prescriptions to another pharmacy or mail order ahead of a known closure and we won’t see much happening
2) One time shock and recovery — People would change pharmacies after the closure and we might see a drop in prescription pick-up rates in the month or two after but a quick rebound.
3) Permanent pick-up loss — people stop picking up their prescription from anywhere and this drop is persistent.

#1 and #2 aren’t bad. #3 is a huge potential problem.

Below is one of her slides from a conference we were both attended last week:

The TLDR: Story 3 with a 15.6% drop in pick-up rates six months after a closure

This is a big deal. Mail order pharmacy was not picking up the slack. Instead 1 in 6 prescriptions that typically would have been picked up just disappeared.

More scarily was some of her unpublished work on other drug classes. One slide made me exclaim louder than I intended “Holy Shit.”

From a policy perspective, perhaps we think about pharmacy closures along the same lines as rural hospitals as key infrastructure that might need additional support as the health effects could plausibly easily dominate the cost of subsidies.

I am both excited and terrified to see what the rest of this research agenda finds.

***DISCLOURES***: Dr. Anderson and I are co-authors, collaborators, co-consultants and co-grant writers on non-related work. I’ll talk about that work in a few months

Pharmacy closures lead to less prescription drug usePost + Comments (31)