United Hospital Fund's New Analysis Finds Drug Costs Significantly HIgher for Insurers in New York State

Thursday, July 6, 2017

United Hospital Fund's New Analysis Finds Drug Costs Significantly HIgher for Insurers in New York State

Prescription drug spending increased significantly for health plans participating in the Medicaid Managed Care and the commercial small group markets in recent years, according to a new report from United Hospital Fund (UHF).

Under Pressure: Prescription Drug Spending Trends in New York’s Medicaid Program and Small Group Market tracked drug spending from 2013 to 2015 for Medicaid plans, and from 2011 to 2016 for small group market insurers, and found average percentage increases in the double digits—or more—for many plans. The report uses state data on per-member-per-month (PMPM) spending by plans for prescription drugs, an approach that accounts for increases or decreases in enrollment and rebates that the plans have received from drug makers.

“Increased drug costs are putting pressure on the both the Medicaid program and the small group market,” said Peter Newell, UHF Health Insurance Project director and a co-author of the report. “They are straining the state budget and complicating longer-term goals for the Medicaid program, and challenging the ability of New York policymakers to shield individual enrollees from bearing the whole cost of pricey drugs on their own while still keeping the lid on overall premium increases.”

Based on an analysis of drug spending for 16 Medicaid Managed Care plans, UHF found that PMPM spending increases from 2013 to 2015 ranged from 0.04 to 30 percent, for an average increase of 21 percent among plans, or about $15.59 PMPM. Four plans reported increases of over 30 percent. In 2015, Empire BlueCross BlueShield HealthPlus reported the lowest spending ($66.38 PMPM), and HealthNow BCBS, the highest ($135.84 PMPM).

Ten of 16 MMC plans reported drug expenses in 2015 that were higher than inpatient hospital expenses that year. However, the rise in MMC drug spending does not include one of the biggest drivers of drug cost increases overall--drugs administered in a provider’s office, including costly specialty drugs that may be injected or infused. These are reported in a different category.

In the small group market, UHF found that spending across 11 commercial insurance companies rose an average of 62 percent between 2011 and 2016, or $27.73 PMPM, with some plans shouldering increases of 70, 80, and even 108 percent. Empire BCBS reported the highest spending in 2016 ($136.95 PMPM) and MVP Health Plan the lowest ($53.66 PMPM). Commercial health plan drug expense calculations do not include drug spending that was part of a hospital charge, also reported in a different category.

The report also describes New York mechanisms that shield consumers from bearing the full brunt of drug cost increases. Cost sharing is very limited in the MMC program, for example, and New York’s “three-tier only” pharmacy benefit requirement for commercial coverage does not permit four- and five-tier formulary structures that are common in most states and expose consumers to high coinsurance on costly specialty drugs.

“As New York joins the ranks of states seeking to rein in the rising cost of prescription drugs, it is important to keep in mind that federal health care proposals being considered in Washington would make that task much harder,” said UHF President Jim Tallon, citing sharp reductions in Medicaid funding for states, and premium and cost-sharing subsidies for individuals and families buying coverage on the ACA exchanges.

The report was co-written by Peter Newell and Steven R. Hefter, policy intern at UHF, and supported by the New York Community Trust. The full report can be downloaded here.

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