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USC-Brookings Schaeffer on Health Policy

The essential scan: Top findings in health policy research

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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.

Abigail Durak

Center Coordinator - Center for Health Policy, Brookings

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Stephanie Hedt

Policy Communications Associate - Leonard D. Schaeffer Center for Health Policy, USC

Will Palmisano

Senior Research Assistant - Center for Health Policy, Brookings

Proposed Three-Part Pricing Model for Drugs with Uncertain Efficacy Allows Prices to Change with New Information

Perspective by: Dana P. Goldman, Karen Van Nuys, Wei-Han Cheng, Jakub Hlavka, et al

While the goal of value-based pricing models is to better align incentives between payers and providers, implementing such models within the pharmaceutical space has proven challenging. First and foremost, though new drug prices are based on clinical trial outcomes, manufacturers and payers often disagree about the value of the drug over the long run in a real world setting. A new NEJM catalyst article outlines a different approach: a tiered pricing system that allows prices to vary over fixed time intervals as data on the drug’s real world efficacy is gathered. The authors propose a low initial price during an evaluation phase, followed by a higher or lower price that depends upon the drug’s real-world performance. The price would prevail during a fixed reward phase before being reduced to facilitate access uptake during an access phase. Using PCSK9 inhibitors as an example, the authors modeled scenarios where the drug had low, expected and high efficacy and showed that in all three scenarios, manufactures, patients, and payers are all better off compared to the status quo where launch prices are set high and remain there until patent expiry. The authors acknowledge a number of obstacles would need to be worked out before such a model could be implemented, including establishing long-term agreements between payers, manufactures, and PBMs and the effect such an agreement may have on future product competition. Full article here.

Three-part pricing of PCSK9 inhibitors


Provision of Low-Value Health Care Services Common for All Physicians, but Varies Widely Within Regions and Organizations

Study by: Aaron L. Schwartz, Anupam B. Jena, Alan M. Zaslavsky, and J. Michael McWilliams

One important driver of elevated healthcare spending in the United States is the over-provision of low-value health care (LVHC) services. Prior studies of LVHC service provision have thus far been unable to measure the variation in LVHC provision at the physician-level. However, a new study using Medicare enrollment and claims data from 2008 to 2013 finds that primary care physicians at the 90th percentile of LVHC provision for their provider organization provide 60 percent more LVHC services than physicians at the 10th percentile at the same provider organization. Furthermore, the authors found that only 1.4 percent of physician variation within organizations could be explained by observable physician characteristics (e.g. age, sex, and training) and that LVHC services were very common even among the least wasteful physicians. These findings suggest that provider organizations could benefit greatly from directly measuring their physicians’ provision of LVHC services in order to support efforts to incentivize more cost-effective practices such as targeting wasteful physicians for retraining and making inclusion in networks and risk contracts dependent on maintaining low levels of LVHC service provision. Full study here.


Medicaid Expansion Shown to Decrease One-Year Mortality for Patients with End-Stage Renal Disease

By: Shailender Swaminathan, Benjamin D. Sommers, Rebecca Thorsness, et al.

Medicaid expansion under the Affordable Card Act may be associated with reduced mortality, but evidence is limited, especially for high-risk groups. Patients with end-stage renal disease (ESRD) are a particularly vulnerable group. For these patients, Medicare provides coverage for patients requiring dialysis, but only after three months of dialysis treatment. During those initial months of dialysis, up to one in five nonelderly patients lacked insurance coverage prior to Medicaid expansion. A new study examines the association of Medicaid expansion with 1-year mortality among nonelderly patients with ESRD initiating dialysis, as well as insurance coverage and predialysis nephrology care. The researchers compared 142,724 patients in expansion states with 93,522 patients in non-expansion states, finding that Medicaid expansion was associated with a significant decline in 1-year mortality rates. In expansion states 1-year mortality rates declined from 6.9 to 6.1 percent post-expansion, while mortality rates dropped from 7.0 to 6.8 percent for non-expansion states. Medicaid expansion was associated with a 10.5 percentage point increase in Medicaid coverage at dialysis initiation, as well as a -4.2 percentage point decrease in being uninsured. There were no significant changes in predialysis nephrology care. These results suggest that spreading Medicaid expansion to states that have not yet adopted it will be beneficial for mortality outcomes among ESRD patients. Full study here.


Medicaid Prescription Drug Spending Increases Linked to Decreases in Mortality Rates

By: Denise Hammock Clayton

Studies of the Affordable Care Act’s Medicaid expansion have thoroughly demonstrated the financially protective effect of Medicaid, but there is still little evidence that it has had a significant effect on health or mortality. A new paper estimates the effect of Medicaid prescription drug spending on mortality, using group and state-specific roll out of Medicaid drug coverage. The author finds that a $1 per resident increase in state Medicaid prescription drug expenditure leads to mortality from internal causes to drop by 2 deaths per hundred thousand, a decline of 0.23 percent. The cost per-death averted for the Medicaid drug program was estimated at $49,600, and the cost per life-year saved was $19,600, indicating that the program was a relatively cost-effective way to add life-years to the population. Overall, this paper shows a causal link between prescription drug coverage for the poor and mortality improvements, and suggests that the broader effects on health are much larger. Full study here.


Moving to a Region with Higher Care Fragmentation Associated with Increased Care Utilization

Study by: Leila Agha, Brigham Frandsen, and James B. Rebitzer

Experts predict that care fragmentation—the division of the healthcare services individual patients receive across many providers —leads to poor care coordination, more utilization, higher costs, and uneven quality. Within Medicare, the effects of fragmentation on utilization, costs, and quality are particularly concerning, considering the median Medicare beneficiary is seen by eight distinct providers each year and 10 percent of patients are treated by over 21 providers. A new study uses patients in Medicare who have moved to a new region to examine whether regional differences in care fragmentation contribute to differences in costs and utilization patterns. The researchers find that roughly 60 percent of the variation in fragmentation across regions is due to the fragmentation of care in the area rather than patient demand. They find moving to a region with one standard deviation higher fragmentation increases care utilization by 10 percent. They found greater fragmentation led to more provider encounters, but fewer visits with primary care providers, and greater reliance on specialists, including specialists whose scope of practice overlaps with primary care provider’s scope of practice. Interestingly, patients increased their use of both high-value services (e.g. testing for diabetics, vaccines) and services associated with over-utilization (e.g. repeat imaging, emergency department visits). These findings suggest policies aiming to reduce care fragmentation should keep in mind the importance of regional clinical labor markets and local care styles. Full study here.

The Initiative is a partnership between the Economic Studies program at Brookings and the USC Schaeffer Center for Health Policy & Economics, and aims to inform the national health care debate with rigorous, evidence-based analysis leading to practical recommendations using the collaborative strengths of USC and Brookings.

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