U.S. employers eye cutting wasteful drugs worth $6 billion
A group of researchers has found that there are medications that could be less expensive alternatives that could be covered by employers based on the benefits provided to employees. Read this blog post to learn more.
A health plan covering thousands of California teachers stopped paying for a diabetes drug that cost $352 per prescription. In its place, the plan now pays less than $13.
The difference? Instead of getting a 1,000-milligram dose of metformin, members got two 500-milligram pills.
It’s just one example of what some employers call “wasteful drugs,” and a coalition of West Coast employers says there are hundreds more. At a time when U.S. President Donald Trump is pushing to trim drug costs for Medicare by tying them to prices in other countries, the coalition is on a crusade to cut company spending on drugs nationwide by simply noting the cheaper choices already available, drawing the ire of drugmakers.
A guidebook produced by the Pacific Business Group on Health and researchers from Johns Hopkins University identifies 49 medications with less expensive alternatives that could be cut from the lists of drugs covered by employers. The group has pushed its approach to large employers for two years. Now it’s focusing on mid-sized companies at conferences, with webinars and through an online Excel sheet designed to help any company identify savings.
Lauren Vela, senior director of member value at the coalition, said it all comes down to who gains in the end. “There are so many folks making so much money on the existing system that the folks who really know how the system works don’t have an interest in changing it,” Vela said by telephone.
Vela presented at three online conferences this summer, and has at least two scheduled for the early fall, she said.
The medications outlined in the guidebook accounted for more than $6 billion in U.S. retail drug spending in 2019, according to data compiled by Bloomberg from Symphony Health. Drugmakers have long been under attack for how they price medications sold in the U.S., and for their efforts to undermine rules on when their products can be sold generically for less.
On Sunday, just weeks before the presidential election, Trump announced he had signed a presidential order on the “most favored nation” plan, which would try to link Medicare Part B and Part D prices to lower prices paid by other countries. In response, groups representing drugmakers said this could hurt their ability to find and test for new medications, while House Speaker Nancy Pelosi said Trump’s action took “no real action” to lower prices.
Researchers aligned with the Pacific Business Group, meanwhile, have analyzed six months of drug use and more than 2.5 million scripts for 15 large self-insured companies. They found that 6% of all claims were for what the report termed “wasteful drugs.”
In the case of just one, the leukemia drug Gleevec, use of generic imatinib could cut the average wholesale price 96%, a savings of $108.28 per pill, according to the report. The group says hundreds of other drugs could be replaced similarly.
“Generic drugs are an important part of the full spectrum of health-care solutions,” said Julie Masow, a spokeswoman for Novartis, the Swiss-based maker of Gleevec.
But the drug, which lost patent protection in the U.S. in 2016, “will remain on the U.S. market to maximize choice for health-care professionals and patients,” Masow said, “and Novartis plans to continue financial support for eligible patients.”
The Pacific Business Group also calls out therapies that combine two existing, cheaper pills into a more expensive single dose. And they urge removing pricey drugs that offer only small changes for the consumer, such as certain extended-release formulations or different dosage concentrations.
Drugmaker pushback
While the Pacific Business Group’s guidebook is gaining support among companies, PBMs — which administer drug plans — and pharmaceutical companies are pushing back.
Drugmakers are taking issue with characterizing drugs as “wasteful.”
“Decision-making power on what medicines patients should take should rest with doctors,” Katie Koziara, a spokeswoman for the Pharmaceutical Research and Manufacturers of America, said in an email.
Koziara said her group favors reforming the rebate system “to help correct PBMs and payers’ misaligned incentives,” boost transparency and share rebates directly with patients.
A trade group for PBMs, meanwhile, disputed the Pacific Business Group’s guidebook, saying it was based on limited data.
Greg Lopes, a spokesman for the Pharmaceutical Care Management Association, called the reports “dated” and said, “PBMs are the only entity in the supply chain reducing drug costs for consumers.”
Pharmacy benefit managers negotiate with drug manufacturers on behalf of employers, determining which drugs should be covered. But the employers say that the way PBMs’ services are sold makes it tough to tell whether they’re really saving money.
PBMs and consultants will typically present a spreadsheet that shows administrative fees, discount off-list prices, and rebate payments. The rebates flow from drugmakers to PBMs and ultimately back to plan sponsors, like employers or unions.
But Vela says employers often can’t easily tell if PBMs retain a portion of the rebates or other payments that incentivize them to keep expensive drugs on the formulary. “You’re hiring an entity to negotiate on your behalf, and the party with whom they’re negotiating is giving them money you don’t know about,” Vela said.
As the PBM business model has come under more scrutiny, benefit managers have pledged to be more transparent with rebates and pass them back to employers.
After recent mergers, the three largest PBMs are now part of companies that also own health insurers, pharmacies and other medical providers: UnitedHealth Group’s OptumRx; CVS Health Caremark; and Cigna Express Scripts.
None of the three leading PBMs would comment on the guidebook analysis.
The array of discounts and rebates PBMs tout to their clients often obscures the fact that employers are paying for high-priced drugs when lower-cost alternatives exist, according to Thomas Cordeiro, a co-author of the guidebook and president of consultant Integrity Pharmaceutical Advisors.
“Just because you have a high rebate doesn’t mean your cost is going to be low,” Cordeiro said.
SOURCE: Bloomberg News. (14 September 2020) "U.S. employers eye cutting wasteful drugs worth $6 billion" (Web Blog Post). Retrieved from https://www.employeebenefitadviser.com/articles/u-s-employers-eye-cutting-wasteful-drugs-worth-6-billion
What employers are missing in their workforce data
If employers don't analyze their data thoroughly, they may be missing valuable information that could save their establishment of many costs. Read this blog post to learn more.
Employers are missing out on valuable healthcare information and cost-saving opportunities if they don’t analyze their data thoroughly, panelists at the annual Disability Management Employer Coalition digital conference said.
According to professionals from an insurance company in Portland, Ore., many employers have access to three types of data: healthcare, absence and productivity. HR departments are typically tasked with collecting and analyzing this data, but rarely do they use all three together. But maximizing these findings can help employers better inform their benefit decisions, the panelists said.
“Most employers want to know how much they’re spending on healthcare, but they can learn so much more than that,” said Case Escher, managing partner of the insurance company in Portland, “Very few [employers] use it to explore how health of the workforce is affecting productivity.”
“By comparing health data and absence, you can see if a health condition is causing an employee to miss more work than usual,” said Brycie Repphun, account executive at the insurance company in Portland. “You can use this information to help better inform that person about the services available to them to help them be successful at work.”
Employers can also use their productivity data to help determine if individual employees, or an entire team, are struggling, Escher said. Since productivity is measured differently at every company, and in various positions, employers have to exercise their own judgement about how to interpret it, he said.
“Obviously, if it’s a sales position, and one of your top performers is out because of medical issues, or another personal reason, the productivity of that team is going to suffer,” Escher said. “And if that person is going to be out for a while, the data will likely show that the rest of the team is getting burned out faster to compensate for being understaffed.”
Since the majority of the nonessential workforce is working from home due to the pandemic, Repphun recommends that employers start looking at their data to see how employees are coping.
“Health conditions can definitely impact work performance, but we’re finding that this is happening because of the current work from home situation,” Repphun said. “People aren’t working in ideal conditions, and many have children learning at home as well.”
Escher said self-funded employers are better positioned to make use of their workforce data because they don’t have to go through multiple third-party providers to access all of it. But other employers can still benefit from the information if they’re willing to put in the time and effort to retrieve the reports. While employers can certainly survey their workforce to gauge how working remotely is affecting their productivity, Escher and Repphun said they can get a clear answer by looking at all three data points.
“There’s an indisputable link between health and productivity,” Escher said. “As an employer, you can take this information and use it to make smart decisions to help your employees continue to be successful.”
SOURCE: Webster, K. (31 August 2020) "What employers are missing in their workforce data" (Web Blog Post). Retrieved from https://www.employeebenefitadviser.com/news/what-employers-are-missing-in-their-workforce-data
New drug plan would curb exorbitant pharmaceutical costs
California Governor, Gavin Newsom has proposed a pharmaceutical plan to cut costs of pharmaceutical prescriptions. It was suggested that using low prices obtained by the state, could help other buyers. Read this blog to learn about how California Governor is purposing an attempt to lower costs for California residents.
California’s governor unveiled plans to establish a state-run generic-drug wholesaler, as part of a series of measures that together would constitute one of the furthest-reaching attempts to curb pharmaceutical costs in the U.S.
Gov. Gavin Newsom on Thursday also proposed creating a single market that would allow drug buyers to pool their bargaining power to drive down costs. And Newsom suggested using low prices obtained by the state’s Medicaid program to aid other buyers, among other steps.
The most populous U.S. state, California has a history of using its economic muscle to try to influence national policy on everything from auto emissions to health care. The drug-pricing proposals, which in some cases appear to require new law, are likely to be opposed by a pharmaceutical industry that has formidable economic and legal wherewithal of its own.
“These nation-leading reforms seek to put consumers back in the driver seat and lower health care costs for every Californian,” Newsom, a Democrat, said in a statement.
The plans, released as part of the state’s proposed 2020-2021 budget, are almost certain to face substantial practical, political and legal hurdles. For example, the proposal to create a state-run drug label would rely on drug companies to supply inventory on a contract basis.
Companies could balk at that notion if it stands to further compress their margins. Major generic manufacturers, including Mylan NV and Teva Pharmaceutical Industries, have struggled to turn a profit on some widely used medications. For higher-cost generic drugs, there can be few competing manufacturers with the licenses to produce the pills for the U.S. market.
Creating a single buying pool could run into difficulties, as well. Newsom’s proposal says state programs, health insurers and private employers would band together as a sole buyer, and that drugmakers would have to offer their products at one price to the entire market.
But that could limit patient access to medications if pricing disputes lead drug companies to withhold their products. In Europe, negotiations between drugmakers and government health programs have resulted in some expensive drugs not being available, one of the trade-offs for the continent’s typically lower costs. It’s unclear if California could successfully hold together a large pool of independent buyers in the face of pressure from patients unable to access treatments.
SOURCE: Bloomberg News (09 January 2020) "New drug plan would curb exorbitant pharmaceutical costs" (Web Blog Post). Retrieved from benefitnews.com/articles/new-c-a-drug-plan-would-curb-exorbitant-pharmaceutical-costs
Health insurance surpass $20,000 per year, hitting a record
According to an annual survey of employers, the cost of family health coverage has now surpassed $20,000, a record high. The survey also revealed that while most employers pay most of the costs of coverage, workers' average contribution for a family plan is now $6,000. Read this blog post from Employee Benefit News to learn more.
The cost of family health coverage in the U.S. now tops $20,000, an annual survey of employers found, a record high that has pushed an increasing number of American workers into plans that cover less or cost more, or force them out of the insurance market entirely.
“It’s as much as buying a basic economy car,” said Drew Altman, chief executive officer of the Kaiser Family Foundation, “but buying it every year.” The nonprofit health research group conducts the yearly survey of coverage that people get through work, the main source of insurance in the U.S. for people under age 65.
While employers pay most of the costs of coverage, according to the survey, workers’ average contribution is now $6,000 for a family plan. That’s just their share of upfront premiums, and doesn’t include co-payments, deductibles and other forms of cost-sharing once they need care.
The seemingly inexorable rise of costs has led to deep frustration with U.S. healthcare, prompting questions about whether a system where coverage is tied to a job can survive. As premiums and deductibles have increased in the last two decades, the percentage of workers covered has slipped as employers dropped coverage and some workers chose not to enroll. Fewer Americans under 65 had employer coverage in 2017 than in 1999, according to a separate Kaiser Family Foundation analysis of federal data. That’s despite the fact that the U.S. economy employed 17 million more people in 2017 than in 1999.
“What we’ve been seeing is a slow, slow kind of drip-drip erosion in employer coverage,” Altman said.
Employees’ costs for healthcare are rising more quickly than wages or overall economy-wide prices, and the working poor have been particularly hard-hit. In firms where more than 35% of employees earn less than $25,000 a year, workers would have to contribute more than $7,000 for a family health plan. It’s an expense that Altman calls “just flat-out not affordable.” Only one-third of employees at such firms are on their employer’s health plans, compared with 63% at higher-wage firms, according to the Kaiser Family Foundation’s data.
The survey is based on responses from more than 2,000 randomly selected employers with at least three workers, including private firms and non-federal public employers.
Deductibles are rising even faster than premiums, meaning that patients are on the hook for more of their medical costs upfront. For a single person, the average deductible in 2019 was $1,396, up from $533 in 2009. A typical household with employer health coverage spends about $800 a year in out-of-pocket costs, not counting premiums, according to research from the Commonwealth Fund. At the high end of the range, those costs can top $5,000 a year.
While raising deductibles can moderate premiums, it also increases costs for people with an illness or who gets hurt. “Cost-sharing is a tax on the sick,” said Mark Fendrick, director of the Center for Value-Based Insurance Design at the University of Michigan.
Under the Affordable Care Act, insurance plans must cover certain preventive services such as immunizations and annual wellness visits without patient cost-sharing. But patients still have to pay out-of-pocket for other essential care, such as medication for chronic conditions like diabetes or high blood pressure, until they meet their deductibles.
Many Americans aren’t prepared for the risks that deductibles transfer to patients. Almost 40% of adults can’t pay an unexpected $400 expense without borrowing or selling an asset, according to a Federal Reserve survey from May.
That’s a problem, Fendrick said. “My patient should not have to have a bake sale to afford her insulin,” he said.
After years of pushing healthcare costs onto workers, some employers are pressing pause. Delta Air Lines Inc. recently froze employees’ contributions to premiums for two years, Chief Executive Officer Ed Bastian said in an interview at Bloomberg’s headquarters in New York last week.
“We said we’re not going to raise them. We're going to absorb the cost because we need to make certain people know that their benefits structure is real important,” Bastian said. He said the company’s healthcare costs are growing by double-digits. The Atlanta-based company has more than 80,000 employees around the globe.
Some large employers have reversed course on asking workers to take on more costs, according to a separate survey from the National Business Group on Health. In 2020, fewer companies will limit employees to so-called “consumer-directed health plans,” which pair high-deductible coverage with savings accounts for medical spending funded by workers and employers, according to the survey. That will be the only plan available at 25% of large employers in the survey, down from 39% in 2018.
Employers have to balance their desire to control costs with their need to attract and keep workers, said Kaiser’s Altman. That leaves them less inclined to make aggressive moves to tackle underlying medical costs, such as by cutting high-cost hospitals out of their networks. In recent years employers’ healthcare costs have remained steady as a share of their total compensation expenses.
“There’s a lot of gnashing of teeth,” Altman said, “but if you look at what they do, not what they say, it’s reasonably vanilla.”
SOURCE: Tozzi, J. (25 September 2019) "Health insurance surpass $20,000 per year, hitting a record" (Web Blog Post). Retrieved from https://www.benefitnews.com/articles/health-insurance-costs-surpass-20-000-per-year
Your bad work environment may be raising your healthcare costs
A growing amount of research is documenting a relationship between stressful work environments and a range of chronic conditions. Research is also finding a link between employee health and employee job performance. Continue reading to learn how your work environment could be raising your healthcare costs.
If you want to reduce the cost of healthcare for your employees — while simultaneously improving care — you may need to take a serious look at your work environment. When reviewing areas that could help reduce costs, a much overlooked aspect is a stressful work environment.
While employers have done a lot to reduce the risk of potential injuries in the workplace, they have done far less to reduce stress, which could also be harmful.
Research finds a link between employee health and job performance. There also is a growing body of research documenting the relationship between a stressful work environment and a range of chronic conditions — including depression, hypertension and sleeping problems. But employers often struggle to connect the dots between these health concerns and supporting a healthy environment for employees.
It’s difficult, if not impossible, to manage something that remains unmeasured. That’s why measuring outcomes beyond healthcare cost fluctuations, such as absence, periods of work disability and job performance, can help employers understand a broader range of outcomes important to the successful operation of their business.
When employers ask how they can affect the health of their employees, I ask what they know about the working conditions in their organization. Is there management trouble, high turnover, high illness-related absence or low job satisfaction? Some of this can be determined from employee satisfaction surveys, or analyses of sick leave data and work disability claims. Often, even more can be discovered by gathering employee feedback.
For example, listening to employees, equipping them with the knowledge to recognize safety issues and providing the tools or procedures to correct these issues, were key to improving workplace safety. A successful safety review can result in real change. Employees observe this change and a cycle is created where prevention becomes the focus because all are accountable and all have trust based on experience that their identification of potential or real safety issues will be dealt with effectively.
If employers are unaware of the factors in their own work environment that could be modified to lessen psychosocial stressors, a good place to start is by listening to employees. Many employers already conduct job satisfaction surveys or health risk appraisals that provide some information around work and health issues. These same tools could be used to identify and address psychosocial issues in the workplace.
Whatever the channel — a suggestion box, a designated HR representative, a focus group, a survey — it must provide employees with the opportunity to authentically and safely share their perspectives. And, finally, it must be demonstrably legitimate, resulting in employer actions that are clear and meaningful to all.
Typically employers use health and wellness programs in an attempt to remediate rather than prevent illness. Our interviews with medical directors of some of the leading U.S. corporations revealed a similar finding. Often, the medical director or chief health officer is charged with improving employee health, while the HR benefits manager is charged with reducing healthcare costs. Not surprisingly, these two goals can be at odds with each other. Imagine the company with a large percent of untreated depression.
So how can employers know what works or even what to try?
Evaluators often start their work by asking why particular activities, services or coverage types were chosen or implemented. This helps identify those areas more proximal to the employment setting (something about the job or in the work environment, for instance) and those areas more distal to the employment setting (such as medication formulary). To put a fine point on the problem, Pfeffer notes that “putting a nap pod into a workplace is not going to substitute for the fact that people aren’t getting enough sleep because they are working 24/7.”
Those looking to get started might begin by watching Working on Empty, an 11-minute documentary, which can provide solid direction for the type of information you’re seeking from your employees. Honor their voice and insight, and use it to implement real change. In doing so, you will build trust and a channel for contribution that improves outcomes for employees and employers.
SOURCE: Jinnett, K. (20 May 2019) "Your bad work environment may be raising your healthcare costs" (Web Blog Post). Retrieved from https://www.benefitnews.com/opinion/workplace-stress-increasing-healthcare-costs
Hospital pricing transparency: More information, more confusion?
As of January 1, a new rule that requires hospitals to list the prices of all their services and medications they provide is in effect. Read this blog post to learn more about this ruling.
As of the first of this year, a new rule is in effect that requires hospitals to list the price for all the services they provide and medications they prescribe for patients while they’re in the hospital. In theory, this should give patients more information that can help them decide where it makes the most economic sense to receive hospital care. In actuality, while there’s a wealth of new data available, it can be difficult to find — and nearly impossible for people outside the healthcare industry to understand.
The document that aggregates the price information is called a chargemaster, and it can contain tens of thousands of entries. The new rule doesn’t require that the information be written in plain language, only that it be machine readable, so much of the data reads like it’s in a yet-to-be-discovered language. For example, if you download Memorial Sloan Kettering’s chargemaster, you’ll find an Excel spreadsheet that contains 13,088 entries such as “CAP MALE/FEMALE RAIL, $765” and “BX SUBCUT SKIN/INC, $1,771.” Even if a patient puzzles out the meaning of these abbreviations, the prices listed are different from the lower fees that insurers negotiate, so estimating how much you would pay for care is complicated at best and impossible at worst.
The goal of the hospital pricing transparency rule is to help patients understand the cost of their care and choose more wisely when deciding where to receive that care. Unfortunately, the information that is now available adds to the confusion and doesn’t help patients make one-to-one price comparisons when choosing where to receive care. In addition, the rule only covers care delivered by a hospital, so patients don’t have the information they need to make price comparisons for services performed in doctor’s offices, urgent care facilities, diagnostic test sites and outpatient surgical centers.
Though the new rule generally doesn’t help employees, employers can.
Even if price transparency doesn’t help workers better understand the cost of care and choose where to receive that care, there are strategies and resources that employers can provide to help their employees make more informed decisions about healthcare. Here are some of them.
Second opinions. Wrong diagnoses, inappropriate treatments (treatments that don’t meet the evidenced-based standard of care) and medical errors all drive up healthcare costs for both employers and employees and can lead to poorer health outcomes. One strategy to lower the risk of these types of problems is providing employees with streamlined access to second opinions from experienced physicians.
A second opinion can confirm or change an employee’s diagnosis, suggest other treatment options and pinpoint misdiagnoses, especially in the case of serious and complex conditions like cancer, autoimmune disease and back and joint problems. In fact, a Mayo Clinic study found that 88% of people who sought a second opinion from the hospital’s physicians for a complex medical condition received a new or refined diagnosis. Employers can make second opinions available to employees through several channels, including a health insurance plan or as a standalone benefit.
Care coordination. Duplicate testing and medical care is another source of wasted healthcare dollars. When communication between healthcare providers is inconsistent or medical records aren’t updated and shared among all treating physicians, employees may undergo repeat testing — for example, when a primary care physician and a cardiologist both order a cardiac stress test for a patient with shortness of breath. Employers can offer care coordination through a case manager for employees who are living with multiple health conditions.
This support can lower the risk of duplicative testing as well as duplicate prescriptions or medications that can result in interactions, which can put an employee’s health needlessly at risk. Another piece of this equation is the review and coordination of medical records, which is especially important when employees see multiple physicians. A medical records management service should include a review of the employee’s records by an RN or physician, consolidation of a comprehensive medical record, and the creation of a secure electronic medical record that can be shared with the employee’s permission with all treating physicians.
Guidance on where to receive care. While you can undergo a colonoscopy, medication infusion or a range of common surgical procedures at a hospital, that may not always be the most appropriate or cost-effective place to receive care. By offering employees the ability to talk with a care manager or adviser about the procedure they need and the options for where they can receive that care (a hospital, outpatient surgery center or doctor’s office), employers can help them receive the care they need and lower both claims costs and employee out-of-pocket costs.
Medical bill review. Another resource employers can offer to make sure healthcare costs are carefully managed is a medical bill review. Experts estimate that between 30% and 80% of medical bills contain errors that increase costs. There are many different causes of these errors, including the use of the incorrect billing codes and use of out-of-network healthcare providers. In addition to offering employees the services of a medical billing review and negotiation firm, they can provide education that lets employees know what types of errors are commonly made and how to spot them on their own bills.
SOURCE: Varn, M. (13 February 2019) "Hospital pricing transparency: More information, more confusion?" (Web Blog Post). Retrieved from https://www.benefitnews.com/opinion/hospital-pricing-transparency-more-information-more-confusion?brief=00000152-14a5-d1cc-a5fa-7cff48fe0001
Top 10 health conditions costing employers the most
As healthcare costs continue to rise, employers continue to look for ways to target those costs. Read this blog post 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
9. Smoking
8. High cholesterol
7. Depression/mental illness
New rule pushes for hospital price transparency
The Centers for Medicare & Medicaid Services is pushing for a new rule that will force hospitals to provide patients with a list of the cost of all their charges. Continue reading 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
How employers can manage the skyrocketing cost of specialty drugs
The number of specialty drugs continues to grow. At the end of 2016, there were 700 specialty drugs in development, compared to the 10 that were in development in 1990. Continue reading to learn more.
In the past two decades, the number of specialty medications — which treat rare and complex diseases such as multiple sclerosis, pulmonary arterial hypertension, hepatitis C, HIV, cystic fibrosis, some types of cancer and hemophilia — has grown exponentially. In 1990, there were only 10 specialty drugs on the market. By 2015, that number had increased to 300 medications, and by the end of 2016 there were approximately 700 more specialty drugs in development.
These medications are usually very high cost, with some new biologic medications costing more than $750,000 a year. Why are the costs so high? There are a number of factors, including the facts that distribution networks are limited, these medications are complicated to develop and distribute, and there are few, if any, generic alternatives for these drugs.
See also: 6 ways to mitigate specialty drug costs
The Pew Charitable Trusts found that although only 1% to 2% of Americans use specialty medications, they account for approximately 38% of total drug spending in the U.S.
So, how can employers better gain control over the cost of specialty medications? Because there are hundreds of specialty medications, there’s no single strategy for cost management that can be applied universally. To build an effective cost management strategy, employers need to first analyze employee use of specialty medications. The best strategy will approach specialty medication management by disease class and drug by drug.
However, there are key building blocks of a strategy that will both manage costs and ensure that employees have access to the medications they need. Here are six things employers can do.
Assess benefit plan design structure. Employers should consider how they are incenting employees to spend their benefit dollars appropriately and wisely. A multi-tiered medication formulary where employees pay less out of pocket for generic drugs and lower cost medications and more for costly medications is one approach that’s proven effective. To help employees afford these higher out-of-pocket costs, employers can promote manufacturer copay savings programs, which many drug makers offer.
Think about utilization management. This can include requiring prior authorization for high-cost specialty medications and step therapies (employees must start with lower cost therapies and can move up to more costly ones if those are not effective).
Consider a custom pharmacy network design. By narrowing the network of pharmacies that fill specialty medication prescriptions, employers can negotiate a better unit price. A freestanding specialty pharmacy or a pharmacy benefits manager can provide savings by optimizing discounts for both employers and employees.
Offer second opinion and other support services for rare and complex diseases. A newly diagnosed rare or complex disease patient will see, on average, seven different specialists over the course of eight years before getting a true diagnosis and appropriate treatment path. These programs aim to reduce that burden and ensure success with that treatment once it’s identified. A second opinion from a top specialist in the field provides an expert assessment of the diagnosis and recommendations on the most effective treatment protocol. This not only helps manage costs, it lowers the risk of misdiagnosis and inappropriate treatment. Additional case management services can include one-to-one counseling and, when the drug regimen requires, in-home nursing services to help patients better manage their disease and improve outcomes.
See also: How employers can increase employee use of second opinions
Offer site of care choices. Where specialty drugs are administered can have a significant impact on what they cost. Medications administered in an outpatient clinic at a hospital can cost five times as much as those that are injected or infused in a physician’s office or at the patient’s home. Offering services such as home infusion or injection delivered by nurses or incenting patients with lower copays when they receive their medications at their physician’s office can lower overall specialty drug costs.
Educate employees. When an employee or covered family member is diagnosed with a rare or complex condition that will require a higher level of care and the use of specialty medications, employers can connect employees with case managers or similar services that provide education about the condition and the medication, such as how to manage side effects or what alternative medications are available, which can increase employee adherence with the medication regimen.
SOURCE: Varn, M (8 August 2018) "How employers can manage the skyrocketing cost of specialty drugs" (Web Blog Post). Retrieved from https://www.benefitnews.com/opinion/specialty-pharmaceuticals-and-how-employers-can-manage-cost
Reference-based pricing is gaining momentum — here’s why
Healthcare and pharmacy costs are constantly on the rise. In this article, Kern talks about reference-based pricing and explains why it’s 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