The essential scan: Top findings in health policy research

What’s the latest in health policy research? The Essential Scan, produced by the USC-Brookings Schaeffer Initiative for Health Policy, aims to help keep you informed on the latest research and what it means for policymakers. If you’d like to receive the biweekly Essential Scan by email, you can sign up here.

Understanding the Hows and Whys of Implementing State-Based Individual Mandates

Report by: Jason Levitis 

In late 2017, President Trump signed major tax legislation into law that eliminated the penalties associated with the Affordable Care Act’s individual mandate, effectively repealing the requirement. Mandate repeal is expected to lead to substantially higher individual market health insurance premiums and higher rates of uninsurance. A new paper provides a blueprint for states considering instituting their own individual mandates at the state level, using both federal law and Massachusetts law as starting points. According to the author, the key elements of the proposed mandate legislation include: (1) the types of coverage that qualify; (2) the amount of penalties for not maintaining coverage; and (3) the exemptions available. The author notes that instituting a mandate is a straightforward way to protect state health insurance markets by restoring rules in effect under the ACA. It can also offer other potential benefits like limiting the impact of substandard plans, and facilitating coverage outreach through the use of penalty funds. Full report here.

Alternative State-Level Financing For Hepatitis C Treatment Key to Expanding Access to Infected Populations

Viewpoint by: Mark R. Trusheim, William B. Cassidy, and Peter B. Bach

Although highly effective hepatitis C therapies were introduced to the market five years ago, they continue to be out of reach for the majority of patients infected because of the high upfront costs. The problem of high upfront costs is further exacerbated by the fact that many patients with hepatitis C receive care from Medicaid and state prisons-which face increasingly tight budget constraints. A new viewpoint puts forth a “Netflix Model” for HCV therapies whereby a purchasing coalition constituting all payers for healthcare would leverage their scale for purchasing, streamline access to all patients, and ensure payers collectively recapture the long-term savings from avoided future medical costs. The authors outline the steps to implementation and regulatory questions state payers would need to work through. Dana Goldman and Neeraj Sood have put forth similar subscription-based pricing models and applied them to HCV treatment within the Medicaid population to better align the long-term value of many of these drugs with the upfront price. As policymakers and payers grapple with how to manage access to new high-priced, high-value pharmaceuticals, alternative payment strategies like subscription-based purchasing may be the key to expanding access while appropriately valuing innovation. Full viewpoint here.

Partial Rating Area Offering in the ACA Marketplaces Driven by Health Measures of Populations

Study by: Hanming Fang and Ami Ko 

Under the ACA, each state is divided into a set number of geographic “rating areas,” which were primarily based on differences in healthcare provider prices and often cut across several counties. While insurers that want to participate in the marketplaces are required to price their health insurance plan uniformly within the rating area, insurers are not required to sell in all counties within the rating area. A new paper analyzes insurer behavior within this framework, specifically why insurers enter some but not all of the counties in a rating area (a behavior termed partial rating area offering). They find that about 30 percent of insurance companies participating in the marketplaces exclude at least one county from their service area while selling to other counties in the same rating area. Based on their model, the researchers find that the driving factor for this behavior is avoidance of counties with relatively fewer marketplace enrollees and higher share of unhealthy consumers. Given that many counties now have fewer insurers operating in the ACA marketplaces, policymakers may want to consider providing insurers with subsidies or other incentives tied to specific service areas rather than the rating area as a whole. Full study here.

Prices Paid by Different Payers to the Same Hospitals for the Same Service Vary Substantially

Study by: Stuart V. Craig, Keith Marzilli Ericson, and Amanda Starc

A new study measures between-payer and between-provider price variation in Massachusetts. Using data from the Massachusetts All-Payer Claims Database, researchers examined variations in prices paid to the same provider across five well-defined services in addition to overall price levels for inpatient care. Across the five clinical cohorts, the standard deviation in prices across hospitals ranged from 17-31 percent of the mean, controlling for the payer. The standard deviation in prices across payers ranged from 16-28 percent of the mean, controlling for hospitals. Variation in prices across payers affects the value of insurance products. Researchers noted that prices paid are higher for administrative-services-only contracts holding fixed both payer and provider and that while insurer size did not necessarily predict negotiated rates, the ability to “steer” consumer demand towards specific providers was important for negotiating better rates. The paper models negotiation incentives and shows that contractual form and demand responsiveness to negotiated prices are important determinants of negotiated prices. Documentation of this variation in provider negotiated prices is important given current trends in health care costs as well as the move towards high deductible health care plans with larger consumer financial burden. Full study here.