Insurance Switching and the Mismatch Between the Costs and Benefits of New Technologies


When it comes to paying for care, who—besides the patient and his or her caregiver—actually benefits from doing so, and when? It depends on the type of disease and its treatment, according to a new study from the National Pharmaceutical Council, the Analysis Group and Harvard University Professor Dr. David Cutler.

The study, “Insurance Switching and the Mismatch Between the Costs and Benefits of New Technologies,” examined the disconnect between the short-term budget impact of a treatment and its downstream effects on payers and society. Specifically, the study modeled the impact of short-term versus future payments via a curative gene therapy for a childhood disorder, a highly effective hepatitis C therapy, disease-modifying Alzheimer’s therapy, and cardiovascular disease therapy for both rare and genetic higher risk prior cardiovascular event populations.

For example, new therapies that cure hepatitis C require significant upfront investment, but are curative and reduce long-term costs significantly compared with years of living with the disease and its complications.  Immediate budget implications have led many insurers, including state Medicaid programs, to limit access.

By the time the patient reaches the Medicare eligibility age, he may have lower health care costs over the course of his lifetime thanks to that curative treatment. For a variety of reasons, but most acutely for the short-term budget impact, other payers may decide to defer the costs to future payers like Medicare, adding costs to the health care system and delaying access to treatments.

These challenges multiply when considered in the broader context of the health coverage market, and the frequency of changing insurers and plans over time. Government programs are particularly affected given that Medicaid eligibility may change monthly and the large-scale shift of people into the Medicare program upon reaching age 65.

Increasing availability of expensive, yet transformative therapies—such as gene therapies or other personalized medicine approaches—are likely to widen the gap between the initial payer and the payer, which ultimately reaps the downstream benefits.

According to the study, this disconnect will require creative approaches to health care financing models to assure appropriate access to cost-effective therapies, incentivize future innovation, and provide sustainable economics for payers.