10 Years of Research with Impact
From its inception a decade ago, the USC Schaeffer Center for Health Policy & Economics has steadfastly pursued innovative solutions rooted in evidenced-based research to measurably improve value in health. Schaeffer faculty focus on work that informs lawmakers, media and private-sector leaders on today’s pressing healthcare challenges — and, most importantly, research that makes a real impact on improving the health of individuals. The following sections feature 10 areas of research that already have made a lasting impact. While they barely scratch the surface of the breadth and depth of Schaeffer Center efforts, they are powerful illustrations of the importance of relevant, big-picture thinking and grounded, collaborative research that move health policy forward. From predicting the impact of changes in demographics and promoting healthier communities globally to enhancing Medicare, combating the opioid crisis and redefining value in cancer treatments, the Schaeffer Center does more than inform policy — it helps drive decisions to improve delivery of care, foster innovation and enhance healthcare markets. These efforts span the healthcare landscape and will continue to inform policy.
The Schaeffer Center focuses on the major healthcare challenges facing this country — access, quality and cost. The Center’s goal is to improve access for all Americans to quality care, when they need it, while keeping the cost to families, and the nation, affordable. Through rigorous, evidence-based research, Schaeffer Center faculty produce relevant and effective solutions that inform policymakers and lead to better policy decisions.Leonard D. Schaeffer
Making Medicare Work Better
Nearly 60 million older adults and people with disabilities depend on Medicare, which is expected to account for 18 percent of federal spending by 2028. Policymakers rely on Schaeffer Center research as they strive to enhance the program’s effectiveness and sustainability.
The nation’s growing debt threatens Medicare and Medicaid, which have helped countless Americans and reduced poverty. Schaeffer Center researchers work with legislators on a bipartisan basis to bolster these vital systems, making them more efficient and effective.
Longer but Less Healthy Lives
A study led by Dana Goldman using the Schaeffer Center’s Future Elderly Model predicts that the average Medicare beneficiary in 2030 will be in worse physical shape than in 2010. This is a troubling notion given that the number of Americans aged 65 and older also will nearly have doubled to 67 million. A large portion of these future recipients will be disabled and suffering from chronic health conditions including hypertension and diabetes, and more likely to be female than male.
It is clear from these numbers that preventing disease, rather than just treating it after it appears, not only would improve population health but could also save Medicare a lot of money.Dana Goldman
Schaeffer research on payment reform, prescription adherence, plan formulary, benefit design and the Part D coverage gap has been used in policy analyses conducted by federal agencies, including the Congressional Budget Office and Government Accountability Office.
Medicare Part D
Schaeffer Center researchers have analyzed numerous aspects of the Medicare pharmacy benefit program (Part D), including its impact on adherence, formulary and benefit design, the coverage gap, patient out-of-pocket costs, future innovation and the overall impact on the health of Medicare beneficiaries.
For example, Nobel Laureate Daniel McFadden and colleagues have analyzed the impact of consumers not switching to the most appropriate benefit plan on out-of-pocket costs, prescription adherence and health outcomes. They found only 10 percent of enrollees switch plans each year, and many stay in plans that are not optimal based on their care needs. McFadden has presented his work to the Centers for Medicare & Medicaid Services (CMS).
...Only about 1 in 10 [Part D] enrollees switches plans each year, even if the plan has changed its components. That results in average overspending of $373 per person per year for those who choose not to switch, and $1.2 billion in excess subsidies by the government.Daniel McFadden and Joachim Winter in US News & World Reports
Goldman, Geoffrey Joyce, Darius Lakdwalla and Neeraj Sood have analyzed the impact of Part D formulary and benefit design on patient outcomes and future drug innovation. Their work showing how the coverage gap disrupts prescription drug use was cited in expert testimony and addressed in the Affordable Care Act legislation. Joyce and Erin Trish have analyzed the impact of the rise in specialty drugs on drug spending, finding more Medicare beneficiaries use specialty drugs, resulting in significantly higher spending for both the patient and the government.
This research has been instrumental in policy discussions over the past 10 years; it has been cited in government reports, and Center experts have been called upon by federal and state policymakers, analysts and CMS leadership. In total, Schaeffer experts have authored more than 20 papers on Medicare Part D that have been cited over 1,000 times, including in Congressional Budget Office and Government Accountability Office reports.
As the Center for Medicare & Medicaid Innovation tests the benefits of new payment and delivery models, Paul Ginsburg and his colleagues have analyzed the impact of these reforms. For example, Ginsburg has examined the impact of uneven adoption of alternative payment models and offered proposals for better approaches moving forward. These pieces are part of the USC-Brookings Schaeffer Initiative for Health Policy, which provides guidance to policymakers on Medicare reform efforts. The Schaeffer Initiative is led by Ginsburg, who is also a member of the Medicare Payment Advisory Commission.
Investing in America’s Future Health
USC Schaeffer’s microsimulation models effectively demonstrate how demographic, behavioral and policy changes might influence health outcomes — providing invaluable tools for decision-making that can shape the nation’s future health.
Life expectancy has increased in large part because of innovative technologies and significant advancements in treatment for cardiovascular disease and its risk factors. However, recent evidence suggests that these advances may not extend healthy life, especially at older ages. The risk of acquiring Alzheimer’s disease and other dementias rises as we age. These trends also have financial implications— spending on individuals with dementia is higher than the costs of cancer and heart disease combined, and projected to increase considerably.
USC Schaeffer Center’s unique Future Elderly Model (FEM), and expansion Future Adult Model (FAM), are used to predict the consequences of income disparities and changes in life expectancy, as well as quantifying the value of new medical technologies and assessing the societal benefits of disease prevention. These projections help inform crucial decisions made by the Congressional Budget Office, Department of Labor, Social Security Administration and the President’s Council of Economic Advisors.
Delaying Onset of Alzheimer’s
The number of people with Alzheimer’s disease (AD) — the nation’s sixth leading killer — is growing dramatically. Some 5.7 million Americans were living with AD in 2018. Research by Julie Zissimopoulos, Patricia St. Clair and Eileen Crimmins shows that costs associated with Alzheimer’s care will nearly quintuple by 2050. Their extensive investigations noted that the financial burden of AD in the U.S. will increase from $307 billion annually to $1.5 trillion by 2050. Medicare and Medicaid, which today foot three-fourths of this bill, are far from ready.
Even small delays in the onset of Alzheimer's disease and dementia could have significant impacts for the patient, their family and caregivers, and the healthcare system more broadly. Our findings suggest there may be preventive measures we can take now, which is exciting.Julie Zissimopoulos
However, using FEM and FAM, these Schaeffer Center experts also found that delaying AD’s onset even a little can yield major benefits — both in quality of life and overall costs. Medical advances that delaying onset by five years adds about 2.7 years of life. By 2050, a five-year delay in onset would result in a 41 percent lower prevalence of the disease while lowering the overall costs to society by approximately 40 percent.
In related research, Zissimopoulos, Doug Barthold and colleagues were the first to compare the association between multiple types of blood pressure medications and the risk of acquiring AD across different populations. Given the prevalence of high blood pressure in older U.S. adults, targeted hypertension treatments that also reduce AD risk could both improve cardiovascular health and contribute to reducing growing burden of AD.
Other Schaeffer Center-led research evaluated the impact of statins — commonly prescribed anti-cholesterol drugs — on reducing risk. The findings revealed Alzheimer’s incidence dropped by 15 percent among women who regularly took statins and 12 percent among men, compared to patients who took the drugs less often. The findings were published in JAMA Neurology and reported on CNN and in other media outlets.
Schaeffer’s microsimulation model (the FEM) is recognized as the gold standard in economic forecasting. Its projections have been relied upon by the Social Security Administration, Congressional Budget Office and President’s Council of Economic Advisers.
Disparities in Life Expectancy
Dana Goldman and Bryan Tysinger used the FEM to model gains in life expectancy by birth cohort and income, finding American men in the top income quintile born in 1960 gain seven to eight years in life expectancy at age 50 compared to men born in 1930 — while men in the lowest income quintile gain little or nothing. These findings, which were the centerpiece of a National Academies of Science report, have significant implications for the progressivity of public programs, including Social Security. The Government Accountability Office relied on this work for a report analyzing the implications of life expectancy trends for retirement planning.
The researchers also simulated the effects of proposed Social Security reforms such as raising the retirement age and modifying the benefit formula to see how they would affect the reduced progressivity resulting from the widening gap in life expectancy. Policymakers have relied on these findings as they debate modifications to these public programs.
Early Education and Future Health
Nobel Laureate James Heckman used the FAM to estimate the benefits of high-quality early childhood education on lifetime health outcomes. He compared data from low-income African- American children who attended two North Carolina preschools in the early 1970s to control groups who did not attend preschool.
The findings, featured in The Washington Post, The Atlantic and National Public Radio and among more than 140 other media mentions, determined that investing in high-quality early childhood education for at-risk children — as well as employment support for their mothers — yields $7.30 for every dollar spent. The calculation factors in such long-term benefits as reduced taxpayer costs for crime, welfare and healthcare, as well as the advantages of a better-prepared workforce.
Achieving Healthier Communities Globally
From epidemics to changing demographics and chronic disease, healthcare challenges keep growing — as do ways to confront them. Schaeffer collaborations span the world to improve policies for healthier communities everywhere.
Universal Care in India
Research conducted by Neeraj Sood and colleagues proved foundational to India’s National Health Protection Scheme (NHPS), which is expanding healthcare to the nation’s underserved. Sood examined the Vajpayee Arogyashree Scheme (VAS), established in the Indian state of Karnataka in 2010 to increase access to tertiary care for poor households.
Sood found that VAS substantially reduced the region’s mortality rate and eased families’ financial burdens. Meanwhile, taxpayers’ costs could be kept reasonable through bundled payments, prior authorization and focusing on the conditions carrying the highest burden. He also noted the importance of patient outreach and making enrollment easy.
This World Bank study clearly shows how this program benefits the health of the poor in Karnataka,UT Khader, State Minister of Health and Family Welfare, about the 2014 Sood evaluation.
NHPS took up this advice, offering free health insurance to nearly 500 million people — 40 percent of India’s population. Dubbed the “world’s biggest experiment in universal healthcare” by U.K.’s Independent, the program will ensure that people below the poverty line are no longer charged for advanced treatments that would have previously pushed them even deeper into debt.
Consensus on Care
Sood also served as expert health economist for a consensus report from the National Academies of Sciences, Engineering and Medicine (NAS) calling attention to the poor quality of healthcare in low- and middle-income nations. He and his colleagues on the Committee on Improving the Quality of Health Care Globally found that between 5.7 million and 8.4 million people die each year from inadequate care in these countries — accounting for 10 to 15 percent of total fatalities overall.
The work quickly became one of the National Academies’ most downloaded reports. Its recommendations for improving care include: increasing accountability, leveraging universal coverage to improve care, redesigning healthcare systems to improve their capacity and adaptability, combating corruption, and increasing investment in research and development.
Around the world, people are living longer, which — although positive overall — strains the resources of families and society. It also is a major factor in the rising rates of Alzheimer’s and chronic diseases. To help governments grapple with these trends as they consider spending on healthcare, pensions and other programs, USC Schaeffer has developed a global network of collaborators, including researchers with the Organisation for Economic Cooperation and Development (OECD), who are building out country-level FEM-based models in 17 nations to assess how current income inequalities affect people throughout their lifespans.
"FEM is a powerful tool to predict the consequences of public policy for health outcomes, population aging and fiscal sustainability,” Dana Goldman says. “As societies continue their demographic transitions, these country-specific models will provide policymakers around the world with forecasts to make better, evidence-based decisions."
Using the Schaeffer Center Future Elderly Model tool, 17 countries around the globe are forecasting long-term trends, allowing for better resource allocation and greater impact on population health.
Informing the ACA Debate
As contention swirled around replacing the Affordable Care Act in 2017, Schaeffer work bridged the political divide with timely, data-driven analysis aimed at maximizing healthcare’s value and reach.
Repeal and Replace
Winning the White House gave the GOP an avenue to pursue scaling back or repealing the Affordable Care Act (ACA). As the Senate and the House worked on replacement bills, experts from the USC-Brookings Schaeffer Initiative for Health Policy informed the debate with pivotal analysis. As congress pushed forward a repeal bill in 2017 before the Congressional Budget Office could score the expected ramifications, Schaeffer Initiative experts estimated the size of health insurance coverage losses that would result if the bills were passed into law. They also showed how proposed changes to the ACA’s Essential Health Benefits requirements would effectively eliminate protection against catastrophic costs for people with coverage through large employer plans.
In many instances, Schaeffer research was the only published analysis ahead of a major congressional vote. Schaeffer experts, including Paul Ginsburg, Loren Adler and Matthew Fiedler, were the go-to resource for explaining the current state of components of the ACA for media, the public and legislators.
All told, Schaeffer experts, with the leadership of the USC-Brookings Schaeffer Initiative, produced more than 35 articles and reports on the ACA in the year following the 2016 presidential elections.
Schaeffer experts also produced alternative healthcare reform plans. Dana Goldman proposed a bold plan for providing catastrophic insurance to every American not covered by Medicare and Medicaid.
"Being bold means asking for big changes," Goldman wrote. "The current system of employer-based insurance would lose its tax-protected status, which currently costs the federal government $236 billion. Those savings would be used to underwrite the new system."
In addition to meeting with policymakers, Schaeffer experts published influential articles in the New England Journal of Medicine, the Journal of the American Medical Association and other outlets covering healthcare reform. Additional media citing Schaeffer work include HBO’s Last Week Tonight with John Oliver, the BBC and American Public Media’s Marketplace, the country’s most popular business show.
The analysis may be the best estimates the public and Republican senators will see before they vote on the Graham-Cassidy plan.Vox, September 2017, about the timely Schaeffer Initiative analysis
The rigorous and timely analyses led by the Schaeffer Initiative moved the policy debate and positioned Schaeffer experts as the go-to source for elected officials.
Redefining Value in Cancer Care
By determining what is truly important to patients and by developing innovative payment models addressing value, price and access, the Schaeffer Center is redefining value in cancer care.
How do you effectively quantify the gains to society and patients of new cancer therapies over time? A pivotal 2012 study headed by Dana Goldman was one of the first to show that the life expectancy of cancer patients was rising more rapidly in the U.S. than in Europe. Building on this finding, he and colleagues compared mortality rates in countries spending less on healthcare with those spending more. They found a difference of nine percentage points in cancer deaths between the nations with the lowest and highest spending increases.
This, along with other studies by Schaeffer experts, were part of a special cancer issue of Health Affairs. Over 1 million stakeholders interacted with the special issue, and the associated video was downloaded more than 35,000 times. The briefing drew a record number of congressional attendees, and more than 100 news outlets featured the studies, including The Wall Street Journal, The New York Times, Politico, Reuters, Fox Business and NPR. The following year, the Economic Report of the President cited the research.
In other pioneering research, Seth Seabury, Goldman, Darius Lakdawalla and others showed how improved cancer treatments and early detection led to significant survival gains of 16.7 percent among patients diagnosed between 1997 and 2007.
Cost and Value
Since cancer is not one disease but many, it requires innumerable treatments that often carry great costs. By quantifying gains, stakeholders can better measure value and cost.
To account for the value that patients place on outcomes, a research team including Lakdawalla and John Romley developed a framework of “hopeful gambles” — riskier treatments offering a potentially longer period of survivability — in contrast to “safe bets,” in which the results were more assured but also more limited. Some 77 percent of surveyed patients preferred to take the risk, suggesting hope should be incorporated into calculating the value of, and access to, therapies. The investigators’ framework can also identify treatments in which costs outweigh value.
More breakthrough therapies are on the horizon. When the first gene therapy for cancer was released in 2017, Goldman and David Agus argued for innovative, value-based pricing models that capture the true gains to society from such drugs and ensure access.
As more therapies for cancer are introduced, Schaeffer research continues foundational work in evaluating their impact on society.
Schaeffer Center research on value in cancer care has been cited in government policy documents, including the Economic Report of the President. National media outlets have referenced the studies hundreds of times, including in The Wall Street Journal and The New York Times.
Value should be defined from the viewpoint of the patient.Darius Lakdawalla, John Romley and colleagues in a 2012 Health Affairs study
Curbing Inappropriate Prescribing
Antibiotics prescribed inappropriately waste resources, can cause health complications and have helped give rise to antibiotic-resistant “superbugs,” while the opioid crisis claims more than 115 lives every day.
Schaeffer Center researchers Jason Doctor and Daniella Meeker have employed theories of behavioral economics — or nudges — to influence provider prescribing behavior without reducing their autonomy. Their research has proved so effective in reducing unnecessary prescriptions that the Centers for Disease Control and Prevention has lauded one strategy — posted pledges — as a “best practice.”
A growing number of public health departments in the U.S. as well as the United Kingdom have reached out to Doctor to better understand nudges and how to implement the interventions he has developed. In recent years, Doctor has leveraged these insights in new research targeted at opioid prescribing. “Our studies suggest that simple and inexpensive tactics, grounded in scientific insights about human behavior, can be extremely effective in addressing public health problems,” Doctor says.
Published in Science, a study conducted by Doctor highlighted an important gap in the care system: Many clinicians never learn of the deaths of patients from opioid overdose, as they simply disappear from their practice. The nudge was simple — the researchers randomly selected half the study participants to receive a notification from the county medical examiner when a patient to whom they had prescribed opioids suffered a fatal overdose.
In the three months after they received the letter, the clinicians’ opioid prescribing decreased by nearly 10 percent compared to the group not receiving a letter. In addition, they were 7 percent less likely to start a new patient on opioids and less likely to prescribe higher doses.
Following the publication of the study in Science, multiple local and state agencies reached out to Doctor for guidance on implementation, including the L.A. County Board of Supervisors, which voted unanimously in favor of a feasibility study on how to implement such an intervention in Los Angeles. The results are particularly exciting given that more traditional state regulations involving mandated limits on opioids have not had much impact.
The authors point to the simplicity of the new approach, which provides an important missing piece of clinical information to physicians. This intervention is easily scalable nationwide as existing state and national resources already track overdose deaths associated with prescription and illicit drugs. For more, see the infographic about the study here.
Before opioids, Doctor led studies aimed at identifying solutions for unnecessary antibiotics prescriptions. He and colleagues, including Meeker and Tara Knight, analyzed the effects of easily adopted “nudges” to reduce over-prescribing, including:
- Posted pledges — having physicians hang posters in their examination rooms that explain safe antibiotic use and that include a signed promise to adhere to proper prescription guidelines
- Accountable justification — programming a prompt to appear when physicians update a patient’s electronic chart that asks them to justify any antibiotic prescriptions for acute respiratory infections
- Peer comparison — periodically emailing participating physicians with their inappropriate antibiotic prescription rates compared to those of top-performing doctors
Following publication of the Schaeffer study on posted pledges, the Centers for Disease Control and Prevention identified the nudge as a “best practice.” Other federal agencies, multiple states and the U.K. are using these techniques to improve prescribing.
Findings show that these measures are making a difference — and can accomplish even greater results as more states and regions implement the strategies.
“These interventions are low-cost and allow the prescribing clinician to retain their decision-making authority while nudging them toward better practices,” Doctor says.
Another study showed that simply regrouping how prescription options are displayed in treatment menus makes a difference. Physicians were roughly 12 percent less likely to order antibiotics unnecessarily if the options were grouped together rather than listed individually. Furthermore, Doctor and his colleagues have analyzed such factors as time of day to evaluate other influences on a prescriber’s habits.
Our studies suggest that simple and inexpensive tactics, grounded in scientific insights about human behavior, can be extremely effective in addressing public health problems.Jason Doctor and colleagues in The New York Times, 2016
The effectiveness of these nudges was further demonstrated when Schaeffer Center research partners, including RAND Corp. and Northwestern University, examined what happened after the nudges were stopped. In a follow-up study published in the Journal of the American Medical Association, the team found that, 12 months after ending the peer-comparison intervention, clinicians increased their antibiotic prescription rate from 4.8 to 6.3 percent. The rate also increased from 6.1 to 10.2 percent among clinicians who were no longer asked to justify their prescriptions. These results underscore the need to adopt these interventions over the long term to ensure continued success.
Examining Hospital and Health System Productivity and Value
Schaeffer experts analyze trends facing hospitals and health systems — and the patients they serve — from managing policy changes to the growing cost of care and new technologies.
Surprise Medical Bills
Even with health coverage, countless Americans still receive massive medical bills from providers outside their insurance networks. USC-Brookings Schaeffer Initiative Director Paul Ginsburg co-wrote the influential white paper “Solving Surprise Medical Bills” and numerous follow-up pieces analyzing the conditions in which surprise bills occur and proposing solutions.
It’s unacceptable that people in the country are faced with surprise medical bills for care they thought was covered or in-network. This is a fight between the insurance plan and the provider, with the patient stuck in the middle.Senator Maggie Hassan (D-NH) in Vox. Solutions proposed by Sen. Hassan and others were informed by Schaeffer research.
Ginsburg and colleagues including Loren Adler, Matthew Fiedler and Erin Trish are resources for federal and state policymakers, including staff at the Department of Health and Human Services, the House Ways and Means Committee, the House Energy and Commerce Committee, and the Senate Finance Committee. Acting on these ideas, a bipartisan group of senators proposed the Protecting Patients from Surprise Medical Bills Act. It includes provisions setting payment standards and limiting patients’ costs to what would be owed to in-network providers.
Hospital Productivity and Patient Outcomes
When the Affordable Care Act linked Medicare reimbursement rates to overall economic productivity, concerns were raised regarding whether hospitals could balance their budgets without compromising quality or services. However, research by the Schaeffer Center’s John Romley, Dana Goldman and Neeraj Sood suggested hospitals — and the nation’s healthcare system more broadly — were performing better than previously thought.
Examining data from Medicare beneficiaries who suffered heart conditions or pneumonia between 2002 and 2011, the team found that annual rates of productivity growth had improved in dealing with each condition. This contrasted with previous studies showing declines — but which did not factor in trends in care quality and illness severity that were accounted for in the Schaeffer study.
Administrative Decisions and Care Patterns
Administrative decisions by hospitals and healthcare systems can often have unintended (and overlooked) consequences for patients. Romley co-authored the first long-term investigation of a reform that established a maximum number of hours a resident could work in a week and its effects on high-risk patients. Reviewing nationwide data from people hospitalized for life-threatening conditions, he and colleagues found that mortality rates declined in both teaching and nonteaching hospitals. However, the rates lowered more quickly at teaching hospitals. When limiting analysis to elderly and other high-risk patients, the percentages improved even more dramatically.
In another creative study, Goldman and colleagues from Harvard and Columbia analyzed mortality and treatment differences among cardiovascular patients admitted when national cardiology meetings are held, compared to non-meeting dates. They found that, in teaching hospitals, adjusted 30-day mortality was lower among high-risk heart patients admitted during such meetings and the rate of high-intensity procedures among these high-risk patients was also substantially lower. The implication of these findings may be an example of “less is more,” meaning for high-risk patients with cardiovascular disease, the harms of this more invasive care may outweigh the benefits. The research became the most-viewed study of the year on the JAMA Internal Medicine website, as well as being highlighted in more than 50 media reports.
The rigorous and timely analyses led by the Schaeffer Initiative moved the policy debate and positioned Schaeffer experts as the go-to source for elected officials.
Improving Performance of Healthcare Markets
Both provider and payer markets have substantially changed over the past decade. Schaeffer Center experts have examined the impact of consolidation and healthcare reform on cost and functioning of the system.
The U.S. spends nearly twice as much on healthcare per person as other high-income countries, yet Americans do not have better outcomes. This higher spending is not because we use more healthcare services but because we pay higher prices. Meanwhile, increasing consolidation and insurance complexity are getting in the way of good commerce and putting patients at a disadvantage.
Rising medical costs threaten the economic security of many Americans and, despite all the resources being spent, the nation’s healthcare system remains unable to function as well as it could. Schaeffer Center analysts explore ways to remove obstacles to efficiency while reducing costs and promoting optimal care. The Congressional Budget Office has cited this work, and Schaeffer experts have shared their insights through testimony before Congress and the California State Senate.
Making Markets Work
Lack of competition is a major factor in the dysfunction of healthcare markets, and increased consolidation may worsen this trend. Research by Paul Ginsburg and colleagues suggests reforms such as increased federal and state scrutiny, removing barriers to price competition, preventing anticompetitive practices and easing the path to financial viability for independent physician practices. State and federal policymakers, including the U.S. Department of Justice, have called upon Ginsburg for expert testimony on competition and consolidation in provider and payer markets. His analysis was cited in a 2018 rule proposed by the Department of Health and Human Services.
Erin Trish shared her expertise on the matter with staffers from U.S. House Energy and Commerce Committee’s Subcommittee on Oversight and Investigations. She has also briefed the Department of Justice, Federal Trade Commission, and Health and Human Services’ Office of the Assistant Secretary for Planning and Evaluation on insurer consolidation. She presented evidence suggesting that consolidation has resulted in higher prices for patients without increasing quality. She also testified before the California Assembly Select Committee on Health Care Delivery Systems and Universal Coverage regarding the pitfalls of a single-payer system.
Had there been a public option, a government-run insurance plan offered alongside private plans, “it would have protected consumers by pushing the effects of consolidation onto providers,” said Paul Ginsburg in the Los Angeles Times.
Driven by lack of competition, ever higher prices are being paid to hospitals, doctors and insurers wihtout leading to better outcomes. It's time to implement a competition policy for healthcare before Americans crumple under a system that is devouring family adn government budgets. Middle-class families spending on healthcare has increased 25 percent since 2007, crowding out spending on clothes, food and housing. We are paying the price for steady consolidation in the hospital and insurance arenas.Paul Ginsburg and colleagues in a 2017 Forbes op-ed
High-deductible health plans (HDHPs), which offer lower premiums in exchange for higher out-of-pocket payments, have grown in popularity. Theoretically, they encourage patients to shop for better deals. But studies led by Neeraj Sood reveal that pushing patients to have “skin in the game” can actually discourage them from seeking preventive care and buying drugs to properly manage their conditions, which may increase both the physical and financial risks to patients.
What we need are more innovative plan designs that encourage consumers with chronic illness to use appropriate health care, but at the same time discourage inappropriate use of health care by relatively healthy consumers,Neeraj Sood
Sood showed that these higher payments would leave more than half of low-income enrollees and more than one-third of those with chronic conditions with excessive financial burdens. Nor do HDHPs actually encourage comparative shopping: Only 4 percent of HDHP enrollees said they compared prices or providers — a percentage just slightly higher than the number of people with conventional coverage who claimed they shopped around.
Sood has been called upon by the California State Senate Health Committee to testify at informational hearings in Sacramento on the impact to consumers of high-deductible health plans.
The Federal Trade Commission, the U.S. Department of Justice and other agencies have called upon Schaeffer Center experts to provide insight in understanding trends in consolidation and competition in healthcare markets.
Supply and Demand
Alice Chen has analyzed the impact on labor markets of various healthcare reform efforts, including examining whether providers changed their practices after the Children’s Health Insurance Program (CHIP) was reauthorized and how fallout from the 2008 recession has affected the labor market for young physicians seeking their first job. She found the impact to be far less than other fields that require high levels of education and training.
Chen’s study revealed that the reauthorization of CHIP in 2009 was associated with newly trained pediatricians being 8 percent more likely to subspecialize and 17 percent more likely to enter a private practice. The research also found evidence suggesting that reauthorization made new pediatricians more likely than adult general practitioners to find jobs in private practices and rural areas.
As the California Assembly weighs whether or not the state should turn to a single-payer healthcare system, its members have called upon Trish to testify about the differences between public and private payment levels. For example, private insurers reimburse hospitals at rates 75 percent higher than Medicare or Medicaid. Trish pointed to the difficulties in choosing optimal payment levels in a uniform system, which could stifle innovation in contracting and care. However, the shift would offer opportunities to reduce prices, simplify administrative costs and align provider incentives overall.
Combating Infectious Diseases
Schaeffer Center research has been pivotal to finding practical, evidence-based strategies that expand access to breakthrough infectious disease treatments while keeping costs in line.
Development of innovative therapies for AIDS significantly altered the disease’s trajectory: Patients can now manage it like a chronic condition instead of a death sentence. These drugs initially were expensive, but Dana Goldman and colleagues found that early initiation — even with high costs — paid both individual and societal dividends. Access to early treatment led to life expectancy gains valued at $80 billion and prevented another 188,000 people from contracting the virus between 1996 and 2002.
Yet even with improvements in care, HIV still infects nearly 40,000 people annually in the U.S. alone. Research by Neeraj Sood and Joel W. Hay outlined the most cost-effective method for reducing this toll in Los Angeles County, where 1 in 4 men who have sex with men are infected. The county is relying on this work to bolster its strategies of HIV/AIDS reduction.
Hepatitis C Solutions
We didn’t initially treat HIV aggressively enough in part because the science wasn’t there to justify it. With hepatitis C, we have the science. We just need to find a way to finance it.Dana Goldman
When a cure for hepatitis C came on the market, the tension between cost, value and access took center stage in the national conversation. The high price tag put widespread use beyond the reach of most patients and payers, leaving the vast majority of the nearly 4 million afflicted Americans without access. Five years after a cure was available, he disease still kills more people nationwide than any other virus.
“Many policymakers have focused on what they see as a high price for three months of therapy, but the value of curing hepatitis lasts a lifetime,” Darius Lakdawalla said in a congressional briefing in 2016. Lakdawalla and Goldman’s research demonstrates that the value of expanding access, even slightly, far outpaces the cost of the drugs. In the years following, the Schaeffer Center leveraged partnerships with Brookings as well as The Hill to engage thought leaders in discussions of who benefits from and who bears the costs of such breakthrough treatments.
The Schaeffer Center provided policymakers with solutions that increase access while encouraging future innovation. As part of the National Academies of Science, Engineering and Medicine, Sood devised a novel payment strategy for Medicaid to leverage competition among drug companies. The company offering the best deal would receive an exclusive contract for a set period. When a federal solution lost traction, he refocused on states. Louisiana already plans to implement this innovative model for providing treatments to its vulnerable populations and other states have expressed interest.
Working with the Department of Veterans Affairs, Jeff McCombs and Steven Fox developed more data-driven strategies for testing, managing and treating the disease.
Schaeffer experts have provided congressional testimony and been called upon by policymakers for advice on how to improve access to lifesaving drugs.
Fostering Better Pharmaceutical Regulation
State and federal agencies turn to the Schaeffer Center’s research and innovative pricing models, which balance the competing priorities of affordability and access while appropriately incentivizing future medical innovation and fostering better policy.
Innovative Pricing Schemes
Historically, prices for prescriptions as well as healthcare procedures more often have been figured per dose rather than by effectiveness or outcome, which can distort incentives for payers, providers and patients. Schaeffer Center faculty, including Dana Goldman, Karen Van Nuys and Darius Lakdawalla, suggest a range of innovative pricing schemes, including value-based, outcomes-based and reference pricing to more accurately align incentives. Schaeffer experts have acted as resources for manufacturers, payers and policymakers as they consider implementing these complex but effective strategies.
Patients around the world benefit from profit-driven drug innovation, for which U.S. consumers pay a disproportionately high share. A study by Goldman and Lakdawalla found that up to 78 percent of worldwide pharmaceutical profits are made from the U.S. market.
Using an economic-demographic microsimulation, Goldman and Lakdawalla estimate that a 20 percent increase in European pharmaceutical prices would generate $7.5 trillion in welfare gains for that continent and $10 trillion in gains for the U.S. over the next 50 years. Such savings also could increase philanthropic subsidies to improve healthcare in developing nations. Since published, the paper has been cited numerous times by policymakers, including two reports by the President’s Council of Economic Advisers.
Patients overspend when prescription copays exceed a drug’s actual price, with pharmacy benefits managers “clawing back” the difference. Research by Van Nuys, Geoffrey Joyce, Rocio Ribero and Goldman gained national attention by revealing how common clawbacks actually are.
Analyzing payments for 9.5 million prescriptions, the team found that customers would be better off paying in cash instead of using their insurance 23 percent of the time and would save an average of $7.69 per prescription. “Industry lobbyists have called the practice of clawbacks rare and an ‘outlier,’” Van Nuys says. “But I wouldn’t call nearly one in four an outlier practice.”
In a separate report, Joyce, Neeraj Sood and colleagues found that uninsured patients pay even higher amounts and can save significant money by buying their drugs at independent pharmacies and by using discount coupons. Their research demonstrated that the cash price for a common antibiotic can vary on average $52 within a single zip code.
Some 100 news outlets reported on the findings about clawbacks, including PBS, Kaiser Health News and NPR. Van Nuys also discussed the findings with federal policymakers, who frequently cited the report in their discussion of the bills.
One policy solution proposed by Van Nuys and colleagues would be to ban gag clauses, which are placed in contracts by pharmacy benefit managers and prohibit pharmacists from telling customers when they could save money by paying out of pocket instead of using insurance. In response to the Schaeffer Center report, Senators Susan Collins (R-ME), Claire McCaskill (D-MO) and Debbie Stabenow (D-MI) introduced bipartisan legislation to ban such clauses. These bills, the Patient Right to Know Drug Prices Act and the Know the Lowest Price Act, were quickly signed into law by President Trump. In addition, a number of states, including California, have introduced and passed legislation to protect consumers.
A recent study found that 1 in 4 consumers needlessly and unfairly overpaid for their prescriptions, but Claire’s bill to fix that JUST passed the Senate.— Archive: Senator McCaskill Office (@McCaskillOffice) September 17, 2018
Today's a good day for anyone who pays for prescriptions—Claire’s hopeful this bill moves quickly to the President’s desk. https://t.co/fTyodyWABi
Americans deserve to know the lowest drug price at their pharmacy, but “gag clauses” prevent your pharmacist from telling you! I support legislation that will remove gag clauses and urge the Senate to act. #AmericanPatientsFirst— Donald J. Trump (@realDonaldTrump) September 17, 2018
Following the Schaeffer Center study quantifying clawbacks, policymakers in both the House and Senate started looking for a solution. In fall 2018, President Trump signed a bill banning gag clauses, a policy solution identified in the report.
Follow the Money
Any prescription drug price interventions should be predicated on a clear understanding of the economic forces driving increases and the parties responsible for them. Sood led research that analyzed the pharmaceutical distribution system, along with the cost and profit margins of each system player. He and co-authors Goldman and Van Nuys found that intermediaries — insurers, wholesalers, pharmacies and pharmacy benefit managers — capture $41 of every $100 spent on retail prescription drugs.
While this complex and opaque system allows competition to regulate prices, it also can lead to market distortions disproportionately benefiting certain parties. “While the current analysis cannot say definitively whether any sectors make excessive profits, greater scrutiny of pricing policies of each sector and more competition throughout the distribution system is warranted,” the authors conclude.
Sood personally briefed the Federal Trade Commission about the team’s analysis, and the research has been cited in multiple government reports since its release.
View the full report