(Bloomberg Opinion) -- Recent data show that drug overdose deaths in the U.S. were 10 percent higher in 2017 than 2016, with an almost 50 percent increase in those related to synthetic opioids. A new research paper points to a glimmer of hope in this otherwise bleak story: Medicare Advantage insurance companies seem to be doing a surprisingly good job at mitigating opioid abuse.
Medicare plays a larger role in the epidemic than many people may appreciate. The program is the largest single purchaser of opioids; it accounts for more than a fifth of prescription opioid spending and in 2017 alone spent more than $3 billion on these drugs. And use is relatively widespread: Almost a third of people receiving drug coverage through Medicare obtained an opioid prescription last year. Some research even suggests the expansion of drug coverage under Medicare’s Part D is partially responsible for the problem, by reducing the cost of prescribed drugs to consumers (even if the people receiving the lower-cost prescriptions diverted the drugs to others).
Given the prominent role played by Medicare, the government is right to crack down on abuses, for example by requiring pharmacists to discuss large prescriptions with prescribing doctors. The recent research is also important, however, because it suggests part of the program could provide part of the solution.
Medicare Advantage, which is provided through private insurance companies, covers more than a third of beneficiaries. The research, by the economists Laurence Baker, Kate Bundorf and Daniel Kessler at Stanford, examined patterns of opioid prescribing for Medicare Advantage beneficiaries in 2014 for people aged 66 or older.
Since most of Medicare Advantage provides both drug and medical insurance, the authors surmise that the insurance plans have a stronger incentive to mitigate opioid problems. As the authors argue, the Medicare Advantage plans have “the incentive to account for the spillover effects of prescription drug use on the cost of care overall and can choose which physicians to include in its network and how it manages care.” Stand-alone plans providing only Part D drug coverage, by contrast, do not face the same incentives, since the cost of addressing medical problems is not their responsibility.
The economists find that beneficiaries in Medicare Advantage plans were 9 percent to 37 percent less likely to obtain an opioid prescription than other beneficiaries. That’s a significant impact. For example, it is well known that opioid problems are significantly more prevalent among low-income populations and in areas with high unemployment; the Medicare Advantage effect is roughly the equivalent of living in a county with socioeconomic advantages rather than one with high poverty and unemployment.
The research also highlights significant skewness in prescribing behavior. The top 1 percent of prescribing doctors, for example, accounted for 27 percent of all Medicare opioid prescriptions written, and the top 10 percent of doctors accounted for more than three-quarters of the total. About half the lower opioid prescription rates between those enrolled in Medicare Advantage and others reflects fewer prescriptions from the highest 1 percent of prescribing doctors.
The researchers emphasize the importance of integrating the drug and medical insurance to align incentives properly, but they did not assess whether the insurance companies were effective because they were more aggressive in excluding high prescribers from their networks, altered benefits in a manner than discouraged people from visiting such doctors, or made other changes that reduced the need for opioids.
Whatever the cause, the relative effectiveness of Medicare Advantage plans in managing opioid prescriptions is welcome news. Such plans are likely to expand their coverage over time, with some market observers expecting them to account for half or more of all beneficiaries in coming years. As they cover an increasing share of Medicare beneficiaries, let’s hope they remain effective at mitigating the opioid problem.
(Full disclosure: Lazard regularly advises firms in the health-care sector.)
To contact the editor responsible for this story: Max Berley at mberley@bloomberg.net
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Peter R. Orszag is a Bloomberg Opinion columnist. He is a vice chairman of investment banking at Lazard. He was director of the Office of Management and Budget from 2009 to 2010, and director of the Congressional Budget Office from 2007 to 2008.
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