Cost Sharing in Insurance Coverage for Precision Medicine

Mark V. Pauly

No 24095, NBER Working Papers from National Bureau of Economic Research, Inc

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.

JEL-codes: I11 I13 O32 (search for similar items in EconPapers)
Date: 2017-12
New Economics Papers: this item is included in nep-hea and nep-ias
Note: EH
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Citations: View citations in EconPapers (2)

Published as Cost Sharing in Insurance Coverage for Precision Medicine , Mark V. Pauly. in Economic Dimensions of Personalized and Precision Medicine , Berndt, Goldman, and Rowe. 2019

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