The American Journal of Managed Care Special Issue: HCV
Costs and Spillover Effects of Private Insurers' Coverage of Hepatitis C Treatment
Objectives: Hepatitis C virus (HCV) treatment incentives for private payers may be misaligned because payers must bear immediate costs and may not realize long-term benefits. However, these benefits may accrue to future payers, including Medicare. We examined how and to what extent private payers’ current HCV treatment coverage decisions impact Medicare’s and private payers’ future costs.
Study Design: Discrete-time Markov model.
Methods: We modelled HCV disease progression and transmission to simulate the economic and social effects of different private-payer HCV treatment scenarios on Medicare. The model examined differences between a baseline scenario (current practice guidelines) and 2 alternative scenarios that expand treatment coverage. Spillover effects were measured as reduced HCV treatment costs and medical expenditures in Medicare. We calculated the spillover effects and net social value of each scenario (total value of quality-adjusted life-years accrued over time minus cumulative treatment and medical costs).
Results: With expanded HCV treatment coverage, private payers experience reduced medical expenditures in the 3-to-5-year time horizon; however, they still face higher treatment costs. Over a 20-year horizon, private payers experience overall savings of $10 billion to $14 billion after treatment costs. The expansion of coverage by private payers generates positive spillover benefits to Medicare of $0.3 billion to $0.7 billion over a 5-year horizon, and $4 billion to $11 billion over a 20-year horizon.
Conclusions: When private payers increase HCV treatment coverage, they may achieve significant savings while inducing spillover benefits to Medicare. Future savings, however, may not motivate immediate treatment investments among private payers who experience high beneficiary turnover.
Am J Manag Care. 2016;22(5 Spec Issue No. 6):SP236-SP244
- Expanding private coverage of HCV treatments would generate $10 billion to $14 billion in private-payer savings and $4 billion to $11 billion in spillover benefits to Medicare after 20 years.
- Costs of private-coverage expansion exceed benefits for private payers in the short term; however, this investment would break even after 16 to 17 years.
- Total social value of comprehensive HCV treatment is positive for society, but private insurers do not have the incentive to provide comprehensive HCV treatment.
The higher cost and efficacy of DAAs present a quandary for health system decision makers: treatment costs are borne in the short term, yet a significant portion of the benefits, including reduced disease transmission and HCV-related costs, accrue over the longer term. Few doubt that patients with HCV should be treated with these highly effective novel therapies; the salient policy question is when treatment should occur. A growing body of research indicates that early HCV treatment likely generates the greatest value for patients and society7; however, it is much less clear that early treatment generates benefits for the private payers providing this treatment to patients with HCV. Private payers retain enrollees less than 10 years on average,8 which discourages investments in therapies with long-term benefits. These incentives may conflict with the value other payers receive when they enroll patients who were treated earlier in their disease state, before complications arose.7
The misalignment between short-term costs and long-term benefits is of particular concern for Medicare, which insures individuals 65 or older.9 An estimated 75% of individuals currently infected with HCV in the United States are baby boomers (born between 1945 and 1965)—most of whom will be enrolled in Medicare within the next 10 to 15 years.10 Further, the majority of HCV-positive baby boomers was likely infected decades ago, and therefore, is at serious risk of disease complications when entering Medicare.11
Because private insurers currently cover a large population of HCV-positive baby boomers, their HCV coverage decisions today will impact their own costs, as well as the long-term costs borne by the publicly funded Medicare system.12 In this article, we simulate the transmission and progression of HCV under various private-payer HCV treatment coverage policies, quantify how these polices affect healthcare costs and benefits borne by private insurers and Medicare, and compute the social impact of these policies.
We developed a discrete-time Markov model (Microsoft Excel 2010/VBA, Microsoft Corporation, Redmond, Washington) that incorporates patient insurance status, categorized as Medicare, Medicaid, private, or uninsured. We quantified the downstream indirect effects on Medicare from earlier private-insurer investment in HCV treatment, which we refer to as “spillover effects”13,14 (see Figure 1; a detailed description of the model is available in the eAppendix [available at www.ajmc.com]).
The model categorizes patients into 3 subpopulations by risk of HCV exposure: 1) people who inject drugs (PWID); 2) HIV-infected men who have sex with men (MSM-HIV); and 3) all other adults born before 1992, when systematic testing of the blood supply for HCV began (“Other Adults”), of which baby boomers account for approximately 39%.15 The model assumes that individuals belong to the same risk group throughout the simulation. The risk groups of infected patients are further stratified by HCV genotypes 1, 2, and 3, which account for 70%, 16%, and 12% of the HCV-infected populations in the United States, respectively.16