Transcript Novel Technologies -- A Health Insurance Cost Projection Challenge John Bertko, FSA, MAAA

Novel Technologies -- A
Health Insurance Cost
Projection Challenge
John Bertko, FSA, MAAA
2008 National Health Policy
Conference
February 5, 2008
Bertko - Novel Technology's
Effects
1
Primer on Actuarial Trend
• Trend (next year’s premium increase)
includes:
– Unit cost increases
• Determined by contract changes (mostly)
• Influenced by cost-shifting among payors
– Utilization changes
• Like last year, except where care coordination and
disease management have an effect
– New technology effects on unit costs and
utilization
• Residual effect but necessary to look at the “pipeline” of
new technology
Bertko - Novel Technology's
Effects
2
Recent Private Sector
Premium Trends (2006 Mercer Survey)
16.00%
14.00%
12.00%
10.00%
8.00%
6.00%
4.00%
2.00%
0.00%
-2.00%
'93 '94 '95 '96 '97 '98 '99 '00 '01 '02 '03 '04 '05 '06
Bertko - Novel Technology's
Effects
3
Lessons from Historical Trend
• Trend is not “immutable”
– Pressure from Managed Care
• Reduced unit costs
• Probably minimized the dost effect of new technology
(Project Hope study) in the mid-1990s
– Actuaries must forecast trend factors
• New technology can be estimated from the drug and
device pipeline
• Much harder to forecast physician behavior
• Differences between seniors and pre-65 usage
Bertko - Novel Technology's
Effects
4
“Pipeline” Forecasting By
Insurers
• Several services monitor new drugs and
devices
– Through trials
– Likely uptake assessed by clinical staff
• Drugs monitored
– Over 30 new drugs closely monitored
• Any blockbusters? The BIG question
• How much generic substitution
• Placement on formularies related to both effectiveness and
discounts/rebates
• Example: macular degeneration drugs -- which ones, how
much, etc?
– Some cynicism can be warranted -- e.g., statin
recommendation was not fully implemented
Bertko - Novel Technology's
Effects
5
“Pipeline” Forecasting
• Devices
– Costly new devices and the usage
• Stents
• Lower back fusion devices
• Procedures
– Gastric bypass
• How many? Will the uptake change? Will
marketing make a big difference?
– Breast cancer screening using MRIs
Bertko - Novel Technology's
Effects
6
Example: Breast Cancer
Screening with MRIs
• New March 2007 Am. Cancer Society
(ACS) guidelines
– Annually for women with:
• BRCA genetic mutation
• First-degree relative BRCA carrier
• High family risk model score
– Against MRI screening for women with
<15% lifetime risk
– No recommendation for some women
Bertko - Novel Technology's
Effects
7
Example: Breast Cancer
Screening with MRIs
• Could mean 1.4 million to 1.7 million breast
MRI scans per year
– Cost of $800-$2000 per scan
– Cost of $56,000 per additional cancer detected
• Cost effective for women at high risk for breast cancer
– Peak PMPM cost of ~$2.00
• Around 1% of total health insurance cost
– First impact in 2Q07
Bertko - Novel Technology's
Effects
8
Actuarial Adjustment to Trend
• Actuaries “look in the rearview mirror” to set
trend
– Next year’s trend will be like this year, UNLESS:
• Blockbuster drugs emerge
• Important drugs have generic competitors
• New procedures and devices are marketed and
“extended” to new types of patients
– Mostly an UPWARD adjustment, except for
generic drug substitution
• Is there a minimum technology trend factor?
Bertko - Novel Technology's
Effects
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