Strategic Formulary Design in Medicare Part D Plans

The design of Medicare Part D causes most beneficiaries to receive fragmented health insurance, with drug and medical coverage separated. Fragmentation is potentially inefficient since separate insurers optimize over only one component of healthcare spending, despite complementarities and substitutabilities between healthcare types. Fragmentation of only some plans can also lead to market distortions due to differential adverse selection, as integrated plans may use drug formularies to induce enrollment by patients that are profitable in the medical insurance market. We study the design of insurance plans in Medicare Part D and find that formularies reflect these two differences in incentives. (JEL D82, G22, H51, I13, I18, L65)

Can there be value-based medicine without … values?

“Value-based” is the new, hot prefix. Value-based medicine, value-based insurance design, value-based contracting. It seems that everyone agrees that everything should be based on “value.” But do they – really? Do we really all agree that “value” is the denominator” rather than “price?” Clearly not considering that the “price of medicine” is still very much driving the media and political conversation.But “value” is what patients care about, because “value” means clinical outcomes.When patients say, “My drugs are too expensive!” – what do they mean? As a rule it means that their co-pays and co-insurance fees (their out of pocket expenses) are too high. What are we doing about that? Who sets those costs? What do they mean? How do they impact formulary design and … value-based contracting?Let’s simplify that question: How does value-based contracting impact access and affordability – the only things patients care about and generally the last things that are taken into consideration. And how does it impact PBM and payer profitability?

US Payer Perspectives on Evidence for Formulary Decision Making

To improve formulary design processes and support payers in providing more effective health care, policy makers should consider involving commercial payers in the development of comparative effectiveness research and creation of research and treatment guidelines.