When we launched this newsletter more than three years ago, you were likely reading it in an office with industrial furniture and fluorescent lights. For many of us, our offices now consist of laptops on the kitchen table or COVID-safe patios. Wherever you might be reading this newsletter, we hope this edition provides you with just as much depth about the latest in health spending as your first read.

Digging Deeper

The Costs of Controlling Costs

Out-of-pocket costs for U.S. residents with employer-sponsored insurance continue to increase, despite reforms over the past decade such as eliminating copays for preventive care and ending annual and lifetime benefit limits. A JAMA article detailed the growing problems with rising out-of-pocket costs, highlighting a number of easy-to-understand solutions that nonetheless require a great deal of political will.

Why It Matters:
The author, Harvard’s Meredith Rosenthal, attributes the causes of rising out-of-pocket costs for Americans with employer-sponsored insurance to changes in benefit design, specifically the 111% increase in the average deductible over the past decade and the growing use of coinsurance. Insurers have adopted these strategies to control costs in recent years; however, the effort to constrain costs with higher deductibles and coinsurance has inadvertently driven up costs for patients.

Patients – especially low-income patients – should not be the ones getting the short end of the stick when it comes to constraining costs. As we continue to evaluate overall health system spending, we must look toward approaches that reduce the impact of spending growth not just on the system overall, but also on patients.

A Cost-Containing Approach Worth Considering

Pharmacy benefit carve-outs — an employers’ choice to exclude benefits for certain services or patient populations from a plan’s core medical benefits — have been heavily debated since they were first introduced in the 1980s. The opposing approach, or carve-ins, offers an integrated benefits package from a single vendor.

While some research has shown that carving out benefits can lead to reductions in overall costs, a closer look suggests that the evidence regarding the impact of carve-outs is mixed, in part because the savings from “carve-outs” looks less impressive when compared to the savings from integrated “carved-in” benefits.

A study published in The American Journal of Managed Care this month further bolstered the evidence for the carved-in approach by comparing the health care spending of Blue Cross and Blue Shield of Louisiana members covered by an integrated pharmacy benefit with that of members covered under a pharmacy benefit carve-out. The study found that members with chronic illnesses receiving an integrated pharmacy benefit experienced slower medical cost growth compared with members covered by a pharmacy carve-out.

Why It Matters:
On the surface, paying for less care – the rationale behind carve-outs – is a logical way to slow growth in spending, though hardly one that is attractive for patients. But the study provides further proof that there is another path: an integrated pharmacy benefit approach that can actually reduce medical spending growth.

More research on this approach is needed though, as the study did not examine whether an integrated approach would be better for patients overall, nor did it assess patient well-being under the two opposing models. The study does provide an endorsement for working to control costs for patients facing chronic illness though “whole-person care.”

Most important, the findings show that it might be possible to reduce medical spending growth for patients while maintaining quality of care – we just need to ensure we’re keeping the patients in mind.

What We’re Reading

Howell S, Yin PT, Robinson, JC. Quantifying The Economic Burden Of Drug Utilization Management On Payers, Manufacturers, Physicians, And Patients. Health Affairs, August 2021.

While we’re on the topic of financial burdens facing patients, a Health Affairs study showed that U.S. patients are also bearing the brunt of most of the costs related to “administering, countering, navigating and enduring drug utilization management.” Patients shoulder $35.8 billion/year compared to payers ($6 billion/year), drug manufacturers ($24.8 billion/year) and physicians ($26.7 billion/year). Overall, the U.S. spends more than $93 million annually on these costs.

For another view on this article, check out “Rethinking Benefit Design: Eliminating Inefficient Hurdles,” posted on the National Pharmaceutical Council’s blog.

Dialogues on Health Spending

Going Below The Surface Forum partners are leading conversations about health care spending. Check out these recent blogs and upcoming events to take part in the dialogue.

The Role of Employers (and Employees) in the Health Spending Conversation:
As partners in the Going Below The Surface Forum, AcademyHealth and the National Pharmaceutical Council (NPC) consider the drivers of health spending in the U.S. through salons focused on challenging questions. A recent blog post takes a closer look at strategies to reduce costs via employer-sponsored health benefits.

Why Drug Rebates Aren’t Working for Patients:
During a webinar hosted by the USC-Brookings Schaeffer Initiative for Health Policy, NPC President and CEO John M. O’Brien discussed how the Medicare Part D drug rebate system creates barriers to affordable care for patients. In a follow-up blog, Dr. O’Brien delves deeper into the problems with the rebate system and explains that to improve patient access and affordability we must reform health benefit design.

Upcoming Events: