Top 10 health conditions costing employers the most

What health conditions are costing employers the most? As healthcare costs continue to rise, employers are constantly looking for ways to lower their costs. Continue reading to learn more.


As healthcare costs continue to rise, more employers are looking at ways to target those costs. One step they are taking is looking at what health conditions are hitting their pocketbooks the hardest.

“About half of employers use disease management programs to help manage the costs of these very expensive chronic conditions,” says Julie Stich, associate vice president of content at the International Foundation of Employee Benefits Plans. “In addition, about three in five employers use health screenings and health risk assessments to help employees identify and monitor these conditions so that they can be managed more effectively. Early identification helps the employer and the employee.”

What conditions are costly for employers to cover? In IFEPB’s Workplace Wellness Trends 2017 Survey, more than 500 employers were asked to select the top three conditions impacting plan costs. The following 10 topped the list.

10. High-risk pregnancy

Although high-risk pregnancies have seen a dip of 1% since 2015, they still bottom out the list in 2017; 5.6% of employers report these costs are a leading cost concern for health plans.

9. Smoking

Smoking has remained a consistent concern of employers over the last several years; 8.6% of employers report smoking has a significant impact on health plans.

8. High cholesterol

While high cholesterol still has a major impact on health costs — 11.6% say it’s a top cause of rising healthcare costs — that number is significantly lower from where it was in 2015 (19.3%).

7. Depression/mental illness

For 13.9% of employers, mental health has a big influence on healthcare costs. This is down from 22.8% in 2015.

New rule pushes for hospital price transparency

Beginning in January 2019, hospitals will be required to provide patients with a list of the cost of all their charges. Read this blog post to learn more.


The Centers for Medicare & Medicaid Services announced a proposed rule aimed at providing patients with a clear price listing of the cost of their hospital charges. In an effort to fulfill the proposed rule’s objective, CMS suggested an amendment to the requirements previously established by Section 2718(e) of the Affordable Care Act.

CMS issued the final rule (CMS-1694-F), which included the suggested amendment discussed in the April 24, 2018 proposed rule. Currently, under Section 2718(e), hospitals are given the option to either (i) make public a list of the hospital’s standard charges or (ii) implement policies for allowing the public to view a list of the hospital’s standard charges in response to an individual request.

Beginning January 1, 2019, however, hospitals will be required to make available a list of their current standard charges via the Internet in a machine-readable format and to update this information at least annually, or more often as appropriate.

This could be in the form of the chargemaster itself of another form of the hospital’s choice, as long as the information is in machine-readable format. CMS believes that this update will further promote price transparency by improving public accessibility of hospital charge information.

In the final rule, CMS explains that it is aware of the challenges that continue to exist because the chargemaster data may not accurately reflect what any given individual is likely to pay for a particular service or visit.

Additionally, the comments received in response to the proposed rule argue that the chargemaster data would not be useful to patients because it is confusing as to the amount of the actual out-of-pocket costs imposed on a particular patient.

CMS further explains that it is currently reviewing the concerns addressed in the comments, and is considering ways to further improve the accessibility and usability of the information disclosed by the hospitals.

SOURCE: Goldman, M; Grushkin, J; Fierro, C (16 August 2018) "New rule pushes for hospital price transparency" (Web Blog Post). Retrieved by https://www.employeebenefitadviser.com/opinion/cms-rule-pushes-for-hospital-price-transparency


Reference-based pricing is gaining momentum — here’s why

Reference-based pricing has made its comeback. Continue reading to learn what reference-based pricing is and why it is slowly gaining momentum.


In my 25 years in the insurance business I’ve seen many changes. But there’s always been one constant: Healthcare and pharmacy costs continue to accelerate and no regulatory action has been able to slow this runaway train. The problem is that we have focused on the wrong end of the spectrum. We don’t have a healthcare issue; we have a billing issue.

At the root of this national crisis is a lack of cost transparency, which is driven by people who are motivated to keep benefit plan sponsors and healthcare consumers in the dark. Part of the problem is that most cost-reduction strategies are developed by independent players in the healthcare food chain. This siloed approach fails to address the entire ecosystem, and that’s why we continue to lament that nothing seems to be working.

But that could change with reference-based pricing, a method that’s slowly gaining momentum.

Here’s how it works.

Reference-based pricing attacks the problem from all angles and targets billing — which is at the heart of the crisis.

Typically, a preferred provider organization network achieves a 50-60% discount on billable charges. However, after this 50-60% discount, the cost of care is still double or triple what Medicare pays for the same service. For example, the same cholesterol blood test can range from $10 to $400 at the same lab. The same hospitalization for chest pain can range anywhere from $3,000 to $25,000.

Reference-based pricing allows employers to pay for medical services based on a percentage of CMS reimbursements (i.e. Medicare + 30%), rather than a percentage discount of billable charges. This model ensures that the above-mentioned hospitalization cost an employer $3,000 rather than $25,000.

“Negotiating” like Medicare

Reference-based pricing is becoming increasingly popular as more organizations consider the move to correct cost transparency issues as they transition from fully-insured to self-funded insurance plans.

One well-known and considerable example is Montana’s state employee health plan. The state employee health plan administrator received a notice from legislators in 2014 urging the state to gain control of healthcare costs. Instead of beginning with hospitals’ prices and negotiating down, they turned to reference-based pricing based on Medicare. Instead of negotiating with hospitals, Medicare sets prices for every procedure, which has allowed it to control costs. Typically, Medicare increases its payments to hospitals by just 1-3% each year.

The state of Montana set a reference price that was a generous 243% of Medicare — which allowed hospitals to provide high-quality healthcare and profit, while providing price transparency and consistency across hospitals. So far, hospitals have agreed to pay the reference price.

Of course, there is still the risk that a healthcare provider working with the state of Montana health plan, or any other health plan using reference-based pricing, could “balance bill” the member. But a fair payment and plenty of employee education about what to do if that happens could help you curb costs.

If balance billing does occur, many solutions include a law and auditing firm to resolve the dispute. In one recent example, a patient was balance billed almost $230,000 for a back procedure after her health plan had paid just under $75,000. An auditing firm found that the total charges should have been around $70,000, and a jury agreed. The hospital was awarded an additional $766.

Reference-based pricing is a forward-thinking way to manage costs while providing high-quality benefits to your employees. It’s one way to improve cost transparency, which may eventually transform the way that we buy healthcare.

Kern, J. (18 July 2018) "Reference-based pricing is gaining momentum — here’s why" (Web Blog Post). Retrieved from https://www.employeebenefitadviser.com/opinion/reference-based-pricing-health-insurance-gaining-momentum?utm_campaign=intraday-c-Jul%2018%202018&utm_medium=email&utm_source=newsletter&eid=1e52d1873f9d2e8d6bd477da3e7f49a3


Specialty Drugs and Health Care Costs

Prescription drug spending is rising every year and a significant portion of that spending it on specialty drugs. Read on to learn more.


This November 2015 fact sheet was updated in December 2016 to reflect new data.

Overview

Spending on prescription medications continues to rise each year in the United States.1Specialty drugs— including those used to treat conditions such as cancer and hepatitis C—represent a significant portion of this spending. The high cost of these novel therapies, which often offer advancements in patient care, raises affordability concerns for health plans, patients, and consumers.

What is a specialty drug?

The Pew Charitable Trusts defines specialty drugs as medications with high costs for a course of treatment or a year of therapy. Some health plans also categorize drugs as specialty if they are novel therapies; require special handling, monitoring, or administration; or are used to treat rare conditions. In general, elevated costs are a distinguishing characteristic of specialty drugs. A recent survey found that 85 percent of health plans consider high cost a determining factor in identifying specialty drugs.2 Medicare’s definition of specialty drugs is also based on price: Pharmaceuticals costing $600 or more per month are considered specialty.3

See also: How employers can manage the skyrocketing cost of specialty drugs

Cost implications

The estimated price tag for treating a patient with a specialty drug is high: For some chronic conditions, a year of treatment with a specialty drug can exceed $100,000.4 In 2015, only 1 to 2 percent of the American public used specialty drugs, yet they accounted for approximately 38 percent of total drug expenditures.5 And the price of many specialty drugs continues to rise: In 2015, specialty drug unit costs increased by 11 percent.6 More patients are treating their health conditions with these drugs; utilization rose by 6.8 percent in 2015 because of increased use of existing drugs and the introduction of new pharmaceuticals.7 In 1990, only 10 specialty drugs were on the market,8 but there are now more than 300,9 33 of which became available in 2015 alone.10 And nearly 700 specialty drugs are under development.11 Because of higher prices and increased use, spending on specialty drugs represents an increasing share of total health care costs.12 In 2015, specialty drug spending reached $121 billion on a net price basis.13 The estimated number of Americans with annual drug costs greater than $50,000 increased 63 percent in 2014, from 352,000 people to 576,000.14 Many of these patients take multiple drugs, and 92 percent use high-priced specialty drugs.15 Importantly, patients who need specialty drugs face higher out-of-pocket (OOP) costs, because health plans often require a co-insurance payment, which is a set percentage of a drug’s price. Some plans charge a co-insurance payment as high as 33 percent.16

Managing specialty drug costs

To deal with the high cost of specialty medications, payers in public and private programs use a number of strategies to control patient OOP costs and member premiums, such as negotiating with manufacturers to obtain rebates and other discounts that help reduce the prices that plan members pay for medications. Payers also use different benefit design strategies to ensure the appropriate use of medications and manage total drug spending, including:

Formularies and cost sharing: Specialty drugs are typically placed in a health plan’s highest drug formulary tier, where OOP costs are most expensive. Patients are often required to pay co-insurance in order to access these medications. Research shows that requiring patients to pay more out of pocket reduces their use of prescription drugs.17 In their negotiations with drug manufacturers, payers can sometimes achieve lower prices by allowing patients to pay lower OOP costs for drugs.

See also: A Look at Drug Spending in the U.S.

Step therapy: When multiple treatment options are available for a patient’s condition, plans sometimes require patients to try, and fail, treatment with a cheaper, traditional drug before letting them access a specialty drug. Patients with rheumatoid arthritis, for example, are sometimes required to attempt therapy with traditional oral medications before they can use specialty biologics.18

Prior authorization: These policies require a health care professional to provide documentation that validates a patient’s need for a particular medication. Under most prior authorization criteria, clinical information is necessary to verify that a specialty drug is medically appropriate for a patient before coverage is granted.

Looking forward

Many specialty drugs offer meaningful therapeutic advances over existing treatments. However, if current trends continue, the high cost of specialty drugs will have a significant impact on overall health care spending and patients’ OOP costs. Pew is focused on identifying and evaluating policy options that balance the need to control overall health care spending with ensuring patient access to appropriate medications.

Endnotes

  1. Express Scripts, 2015 Drug Trend Report (2016), https://lab.express-scripts.com/lab/drug-trend-report.
  2. EMD Serono, EMD Serono Specialty Digest, 10th Edition: Managed Care Strategies for Specialty Pharmaceuticals (2014), http://specialtydigest.emdserono.com/pdf/Digest10.pdf.
  3. Centers for Medicare & Medicaid Services, Announcement of Calendar Year (CY) 2016 Medicare Advantage Capitation Rates and Medicare Advantage and Part D Payment Policies and Final Call Letter (2015), http://www.cms.gov/Medicare/Health-Plans/MedicareAdvtgSpecRateStats/Downloads/Announcement2016.pdf.
  4. Bradford R. Hirsch, Suresh Balu, and Kevin A. Schulman, “The Impact of Specialty Pharmaceuticals as Drivers of Health Care Costs,” Health Affairs 33, no. 10 (2014): 1714–1720, http://content.healthaffairs.org/content/33/10/1714.short.
  5. Express Scripts, 2015 Drug Trend Report.
  6. Ibid.
  7. Ibid.
  8. American Journal of Managed Care, “The Growing Cost of Specialty Pharmacy—Is it Sustainable?” (2013), http://www.ajmc.com/payer-perspectives/0213/the-growing-cost-of-specialty-pharmacyis-it-sustainable.
  9. Ibid.
  10. Express Scripts, “FDA Approvals Set All-Time High” (2016), https://lab.express-scripts.com/lab/insights/drug-options/fda-approvals-set-all-time-high.
  11. IMS Health, “Overview of the Specialty Drug Trend: Succeeding in the Rapidly Changing U.S. Specialty Market” (2014), http://docplayer.net/4230764-Overview-of-the-specialty-drug-trend.html.
  12. The estimates in this section are based on published reports, some of which use different definitions for a specialty drug. However, the various authors do note that drug price or cost is used as part of their definitions of specialty.
  13. Quintiles IMS Institute, “Medicines Use and Spending in the U.S.: A Review of 2015 and Outlook to 2020,” (2016), http://www.imshealth.com/en/thought-leadership/quintilesims-institute/reports/medicines-use-and-spending-in-the-us-a-review-of-2015-and-outlook-to-2020.
  14. On an invoice price basis, specialty spending was $150.8 billion in 2015.
  15. Express Scripts, “Super Spending: U.S. Trends in High-Cost Medication Use” (2015), http://lab.express-scripts.com/lab/insights/drug-options/super-spending-us-trends-in-high-cost-medication-use.
  16. Kaiser Family Foundation, Medicare Part D at Ten Years: The 2015 Marketplace and Key Trends, 2006-2015 (2015), http://kff.org/medicare/report/medicare-part-d-at-ten-years-the-2015-marketplace-and-key-trends-2006-2015/.
  17. Dana P. Goldman, Geoffrey F. Joyce, and Yuhui Zheng, “Prescription Drug Cost Sharing: Associations With Medication and Medical Utilization and Spending and Health,” Journal of the American Medical Association 298, no. 1 (2007): 61–69, http://jama.jamanetwork.com/article.aspx?articleid=207805.
  18. Express Scripts, Drugs That Require Prior Authorization (PA) Before Being Approved for Coverage (2015), https://www.express-scripts.com/art/medicare15/pdf/prior_authorization_choice.pdf.

SOURCE: PEW (16 November 2015) "Specialty drugs and health care costs" (Web Blog Post). Retrieved from http://www.pewtrusts.org/en/research-and-analysis/fact-sheets/2015/11/specialty-drugs-and-health-care-costs


A Look at Drug Spending in the U.S.

Spending on prescription drugs in the U.S. is projected to overtake other sectors of healthcare in 2018. Continue reading this blog post to learn more.


This fact sheet was updated on April 26, 2018, to reflect newly published data.

Overview

Spending on prescription drugs in the United States is on the rise and is projected to outpace growth in other parts of the healthcare sector in 2018.1 Limited public data on how much various payers and supply chain intermediaries pay for prescription drugs, as well as a lack of consensus on a single metric for drug expenditures, presents methodological challenges in measuring drug spending.

See also: Specialty Drugs and Health Care Costs

Nevertheless, a number of public and private organizations have published drug spending estimates over the past several years, including the share of health spending attributed to drugs. Historical estimates and spending projections from the Department of Health and Human Services’ Assistant Secretary for Planning and Evaluation (ASPE), the Centers for Medicare & Medicaid Services’ (CMS’) National Health Expenditure Accounts (NHEA), the Altarum Institute, and IQVIA are explored in Figures 1 and 2.

Figure 1 illustrates estimates and projections of U.S. drug spending by source from 2010 to 2018. Each incorporates rebates and spending on drugs, excluding over-the-counter (OTC) products.

  • ASPE estimates total prescription drug spending, including retail and nonretail, using CMS NHEA, IQVIA, and Altarum Institute data.2
  • CMS’ NHEA data provide estimates of retail prescription drug spending, excluding nonretail.3
  • IQVIA estimates total manufacturer revenue (“net price spending”), accounting for rebates and other price concessions.IQVIA also breaks down manufacturer revenue for drugs sold in both retail and nonretail settings.

Figure 2 illustrates drug spending as a percentage of health expenditure. Each of these estimates incorporates rebates and spending in retail and nonretail settings excluding OTC products, unless noted below.

  • ASPE estimates total drug spending (retail and nonretail) as a percentage of personal health expenditures, a subset of national health expenditures.5
  • The Altarum Institute estimates total prescription drug spending (retail and nonretail) as a percentage of total national health expenditures.6
  • CMS NHEA estimates drug spending (excluding nonretail) as a percentage of total national health expenditures.7
  • IQVIA estimates net drug spending (retail and nonretail) as a percentage of health care spending, including OTC products that do not require a prescription.8

See also: How employers can manage the skyrocketing cost of specialty drugs

Organizations use different denominators to describe health care expenditures

  • National health expenditures: Total health expenditures, including medical spending and public health activities, administrative costs, and research investments (Altarum Institute and CMS).
  • Personal health expenditures: Spending exclusively on direct patient care (ASPE).
  • Healthcare spending: An estimate of health care spending from the World Health Organization (IQVIA).

What drug spending estimates include

  • Rebates: Drug price reductions intended to increase sales through formulary placement. While the method used to calculate the rebate is specified at the time of purchase, the actual rebate is received in the future, as it is based on product sales. Most rebates are paid to pharmacy benefit managers and health plans. Rebates are accounted for in all five estimates, but none of the organizations has access to the specifics of manufacturer agreements.9 IQVIA approximates rebates and other price concessions using publicly available wholesaler and pharmaceutical sales data, public financial filings, the Medicare trustees’ report, and proprietary audits. CMS NHEA adjusts estimated drug expenditures to account for rebates in retail and mail-order settings.10 Altarum Institute and ASPE apply CMS’ rebate adjustments to their drug expenditure estimates.
  • Payers: Entities other than patients responsible for paying health care costs. In the United States, payers generally include insurance companies, health plan sponsors—such as employers or unions—and pharmacy benefit managers. Medicare is the nation’s largest payer. CMS NHEA data include estimates of pharmaceutical expenditures by private health insurers and public health insurers such as Medicare and Medicaid. CMS NHEA data also incorporate the amount that premiums contribute to the cost of pharmaceuticals, though the data do not include the share of premiums that go toward pharmaceuticals. IQVIA does not directly incorporate patient premiums in its drug spending estimates. CMS NHEA data include nonretail prescription drug spending in overall health expenditures but do not separately report spending on nonretail drugs. Spending on drugs in these sites of care is included in overall health cost estimates for each respective setting (for example, drugs purchased by hospitals are reported as hospital spending). The Altarum Institute uses IQVIA data to estimate spending on nonretail prescription drugs. ASPE also publishes an estimate of pharmaceutical spending for both retail and nonretail outlets.
  • Over the counter: Drugs that do not require a prescription. Only the IQVIA estimate for net drug spending as a percentage of health care spending incorporates spending on OTC products.
  • Retail prescription drugs: Drugs sold in a retail setting, such as a pharmacy, drugstore, mail-order, or other mass-merchandising establishment.
  • Nonretail prescription drugs: Drugs dispensed in clinics and institutional settings such as hospitals, long-term care facilities, and nursing homes.

Endnotes

  1. Gigi A. Cuckler et al., “National Health Expenditure Projections, 2017–26: Despite Uncertainty, Fundamentals Primarily Drive Spending Growth,” Health Affairs 37, no. 3 (2018): 553–63, https://doi.org/10.1377/hlthaff.2016.1627; Centers for Medicare & Medicaid Services, “National Healthcare Expenditure Data,” accessed February 14, 2018, https://www.cms.gov/Research-Statistics-Data-and-Systems/Statistics-Trends-and-Reports/NationalHealthExpendData.
  2. Department of Health and Human Services, Office of the Assistant Secretary for Planning and Evaluation, “Observations on Trends in Prescription Drug Spending” (2016), https://aspe.hhs.gov/pdf-report/observations-trends-prescription-drug-spending. ASPE figures rely on data from the NHEA and the Altarum Institute. ASPE expenditures are available from 2009 to 2013 and projections from 2014 to 2018. This was a one-time publication.
  3. Centers for Medicare & Medicaid Services, “National Healthcare Expenditure Data.” CMS data are sourced from Census Bureau retail data, Medicare and Medicaid claims, and IQVIA data. CMS expenditures are available from 1970 to 2016 and projections from 2017 to 2026. CMS publishes these data annually.
  4. IQVIA, “Medicines Use and Spending in the U.S.: A Review of 2017 and Outlook to 2022” (2018), https://www.iqvia.com/institute/reports/medicine-use-and-spending-in-the-us-review-of-2017-outlook-to-2022. IQVIA data are sourced from wholesaler and pharmaceutical company sales information. IQVIA publishes expenditures from 2013 to 2017 and projections from 2018 to 2022. It updates this publication annually.
  5. Department of Health and Human Services, Office of the Assistant Secretary for Planning and Evaluation, “Observations on Trends in Prescription Drug Spending” (2016).
  6. Charles Roehrig, “A Ten Year Projection of the Prescription Drug Share of National Health Expenditures Including Non-Retail,” Altarum Institute (2017), https://altarum.org/sites/default/files/uploaded-publication-files/Non-Retail%20Rx%20Forecast%20Data%20Brief%20with%20Addendum%20May%202017.pdf.
  7. Centers for Medicare & Medicaid Services, “National Healthcare Expenditure Data,” accessed February 14, 2018, https://www.cms.gov/Research-Statistics-Data-and-Systems/Statistics-Trends-and-Reports/NationalHealthExpendData.
  8. IQVIA, “Understanding the Dynamics of Drug Expenditure: Shares, Levels, Compositions and Drivers” (2017) https://www.iqvia.com/institute/reports/understanding-the-dynamics-of-drug-expenditure-shares-levels-compositions-and-drivers. IQVIA data are sourced from wholesaler and pharmaceutical company sales information and the World Health Organization’s Global Health Expenditure Database from December 2016. This one-time publication includes expenditures from 1995 to 2015.
  9. IQVIA accounts for but does not report drug supply and payment chain entity profit retentions (e.g., discounts, rebates, chargebacks and other financial transactions among manufacturers, pharmacy benefit managers, pharmacies, and wholesalers).
  10. Centers for Medicare & Medicaid Services, “National Health Expenditure Accounts: Methodology Paper, 2015,” https://www.cms.gov/Research-Statistics-Data-and-Systems/Statistics-Trends-and-Reports/NationalHealthExpendData/Downloads/DSM-15.pdf.

SOURCE: PEW (27 February 2018) "A look at drug spending in the U.S." (Web Blog Post). Retrieved from http://www.pewtrusts.org/en/research-and-analysis/fact-sheets/2018/02/a-look-at-drug-spending-in-the-us


Medicare Out-Of-Pocket Expenses Q&A

 

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How much does the average Medicare recipient pay out of pocket for medical expenses?

Q: How much does the average Medicare recipient pay out of pocket for medical coverage and expenses?

A: According to a Kaiser Family Foundation study published in 2018, the average Medicare beneficiary paid $5,503 in 2013, including premiums and out-of-pocket costs for covered care, as well as out-of-pocket costs for things like dental care and long-term care, which are not covered by Medicare. This amounted to 41 percent of the average per capita Social Security income — and that’s expected to increase to 50 percent by 2030.

The Kaiser Family Foundation study included both Original Medicare and Medicare Advantage enrollees. 28 percent of all Medicare beneficiaries were enrolled in Medicare Advantage plans as of 2013. It’s likely that total enrollee spending on Medicare has increased since 2013, as premiums, deductibles, and coinsurance have increased. But for seniors who end up in the Medicare Part D donut hole, total out-of-pocket spending may have decreased, as the Affordable Care Act has been gradually closing the Part D donut hole. But average prices for prescription drugs — and thus, the total amount that people pay in coinsurance, which is a percentage of the cost — have increased since 2013, so people who don’t end up in the donut hole may be paying more for their Part D prescriptions than they were several years ago.

In 2018, the standard Part B premium is $134/month, although most enrollees are paying about $130/month. In 2013, Part B premiums were $104.90/month. The Part B deductible is $183 in 2018. That’s the same as it was in 2017, but it was only $147 in 2013. The Part A deductible and coinsurance also increased slightly in 2018, as did the premium for Part A that applies to people who don’t have enough work history (or a spouse with enough work history) to qualify for premium-free Medicare Part A.

—medicareresources.org