Cost Sharing in Insurance Coverage for Precision Medicine

40 Pages Posted: 12 Dec 2017

See all articles by Mark V. Pauly

Mark V. Pauly

University of Pennsylvania - Health Care Systems Department; National Bureau of Economic Research (NBER)

Date Written: December 2017

Abstract

This paper describes current pattern of insurance coverage for precision medicines and, especially, companion diagnostics and explores what coverage would improve efficiency. We find that currently coverage is common for tests and treatments with clinical acceptance used at high volumes but is haphazard across both private insurers and Medicare for precision medicines in general. Analysis of the case of homogenous patient preferences finds that discovery and use of the test that converts an ordinary drug into a precision drug can either increase or decrease total spending, and might call for full or no coverage of test and treatments. Heterogeneity in marginal benefits from testing and treatment can call for partial coverage. Finally, varying threshold levels for diagnostic test results can lead to a demand curve to test and treatment that calls for partial cost sharing. Numerical examples and case studies of several test-treatment combinations illustrate these points.

Suggested Citation

Pauly, Mark V., Cost Sharing in Insurance Coverage for Precision Medicine (December 2017). NBER Working Paper No. w24095, Available at SSRN: https://ssrn.com/abstract=3085716

Mark V. Pauly (Contact Author)

University of Pennsylvania - Health Care Systems Department ( email )

3641 Locust Walk
208 Colonial Penn Center
Philadelphia, PA 19104-6358
United States

National Bureau of Economic Research (NBER)

1050 Massachusetts Avenue
Cambridge, MA 02138
United States

Here is the Coronavirus
related research on SSRN

Paper statistics

Downloads
2
Abstract Views
147
PlumX Metrics