How are pharmacy benefit managers reacting to the coronavirus?

The spread of COVID-19 is having a widespread impact across industries worldwide. Leaders across the healthcare industry, including pharmacy benefit managers (PBMs), are working to develop policies and interventions to address the rapidly changing healthcare landscape. PBMs are a major influencer in the supply chain of outpatient pharmaceutical products, including financing, distributing, pricing, shipping, and setting policies that affect how prescription medications are dispensed. These entities have moved quickly to develop new policies that provide guidance and assurance to their plan sponsor clients and members amid the coronavirus outbreak.

The interventions put into place serve to mitigate the administrative strain placed on providers, ensure adequate supply and access to medications for members, and support the continuation of business amid a time of great uncertainty. Although the responses were meant to be pragmatic, a major factor that has not been addressed is whether or not these strategies will add cost for plan sponsors, increase drug trend, exhaust the supply of certain pharmaceutical products, or override the plan provisions that sponsors had intentionally built into their programs to manage cost and care.

In this article, Milliman’s Andrew Jackson, Brian Anderson, and Marc Guieb highlight actions PBMs are taking across pharmacy management, patient access, and the supply chain and the potential effects on plan sponsors and members.

How will the coronavirus pandemic impact patients’ out-of-pocket costs?

The unique structure of the U.S. healthcare system means that the out-of-pocket costs for patients requiring hospitalization due to COVID-19 can vary substantially among those with different types of health insurance. In addition, costs to those of different age groups, living in different parts of the country, experiencing different levels of severity, or facing the illness at different times of the year will also vary substantially.

Although it is too early to analyze the healthcare cost data for those who have been treated for COVID-19 in the U.S., historical data from patients who have sought medical attention for influenza or pneumonia may be informative for understanding out-of-pocket costs resulting from COVID-19 treatment. The biological and clinical characteristics of COVID-19 differ from other respiratory infections, but the signs and symptoms that necessitate hospitalization and intensive care for severe cases of the disease are also seen in severe cases of other respiratory infections.

In this report by Milliman’s Stoddard Davenport, healthcare claims data from three large national research databases is used to investigate the variation in out-of-pocket costs for patients who historically experienced acute inpatient hospitalizations involving treatment of acute respiratory infections (pneumonia and influenza). In this analysis, the focus is exclusively on cases that required hospitalization.

How will the COVID-19 pandemic affect health payer operations?

The coronavirus pandemic will have a significant and long-lasting effect on healthcare systems around the world. Health insurers, managed care organizations, and third-party administrators provide infrastructure that facilitates the flow of information and funds throughout the healthcare value chain. Payers answer benefit and coverage questions, connect patients to healthcare services, provide reimbursement for services rendered, facilitate financing, and manage relationships with purchasers.

In the current care delivery and financing paradigm, these day-to-day administrative activities are key to making the U.S. healthcare system work. However, the status quo is threatened as customers and provides experience business interruption on a massive scale due to COVID-19.

In this paper, Milliman’s Barbara Culley, Maureen Lewis, and Andrew Naugle identify five key payer functions are likely to be affected by the COVID-19 pandemic and actions payers can take to ensure business continuity while enhancing their contributions to the value chain.

Comparing Direct Contracting to MSSP ACO and Next Generation ACO programs

Last year, the U.S. Department of Health and Human Services announced a new payment model called Direct Contracting for entities that want to take on risk for fee-for-service (FFS) Medicare beneficiary expenditures. This program built upon existing Centers for Medicare and Medicaid Services (CMS) efforts to reduce healthcare expenditures while attempting to improve the quality of care for FFS Medicare beneficiaries. Although Direct Contracting is designed to appeal to a wide range of entities (including those that have not previously participated in risk programs with CMS) many current Medicare Shared Savings Program (MSSP) and Next Generation accountable care organizations (ACOs) are naturally going to want to understand the potential pros and cons of this program, and how it compares to their current ACO risk-sharing structures.

In this paper, Milliman’s Colleen Norris, Brent Jensen, and Dustin Grzeskowiak provide an in-depth technical evaluation of Direct Contracting, based on the CMS request for applications, along with comparisons to its sister programs MSSP and Next Generation ACO.

Long-term care: The present and the future

The long-term care (LTC) insurance industry has been getting a lot of attention lately. At least one state-level government, Washington, has developed and adopted a social program that targets the need for LTC insurance. Several other states have taken developmental steps to address LTC needs through similar programs or by other means.

The need for LTC services has been fairly well documented since the inception of the private LTC insurance industry in the 1980s. Many Americans rely solely on the coverage from existing social programs (i.e., Medicare and Medicaid) and/or self-funding to cover LTC services. Based on estimates from 2014, only 11% of adults ages 65 and over living in non-facility care settings were covered by private LTC insurance. Additionally, the number of insurance companies offering traditional LTC coverage has decreased since the product was first introduced. The need for LTC is not going away, especially as the population continues to age.

In this article, Milliman’s Stephanie Moench and Shawn Stender discuss the future of the LTC insurance industry.