Spring 2020

Does Your Premium Pay Off?

The Right Idea

When you’re paying an insurance premium, the question “Does my health insurance actually make me healthier?” might be more exasperation than genuine curiosity.

But for Assistant Professor of Economics Martin Andersen this question fuels a unique set of research questions at the nexus of health insurance and health.

What the doctor ordered

The National Institutes of Health recently awarded Dr. Andersen $275,000 to study prescription drug utilization and health outcomes, as they relate to diabetes, urinary tract infections, and pneumonia.

He’s exploring the effects of utilization management – restrictions that insurance companies can place on medications, treatments, and procedures – on beneficiaries’ health outcomes.

“UTIs and pneumonia are quite common for Medicare subscribers – and major causes of morbidity and mortality. We track diagnoses, drugs dispensed, and patient outcomes. Different plans use different utilization management strategies, so we can compare how they’re doing,” he says.

“Since 2006, more than 30 million Americans have been enrolled annually in various Medicare Part D plans. Almost half of all drugs in these plans have some type of utilization management. Understanding these effects will provide insight into whether we should regulate utilization management.”

The Bryan School researcher is also exploring how the process is impacting prescribed opioid use, and by extension overdose rates. Preliminary results show that Medicare manages drugs with overdose risks more tightly – a positive impact. “Having a prior authorization or therapy requirement means you’re less likely to have an overdose.”

But, he adds, economists always look for the trade-offs. “This may mean some patients suffer more pain.”

In 2017 the U.S. spent $3.5 trillion on health care, or 18% of the national economy.

“There’s no prospect of this number going down in the near future. So my fundamental question is: Are we getting value – longer, better, healthier, happier lives – as a result of that spending?”

Proof of concept

One of Andersen’s early successes in illustrating the connections between insurance and health came from an analysis of the 1973 expansions of Medicare coverage – specifically their effects on individuals with end-stage renal disease, in terms of insurance coverage, health care utilization, and mortality.

“Suddenly, people who could never have afforded lifesaving dialysis were receiving this treatment,” says Andersen. “Because Medicare was paying dialysis clinics, more could enter the market, giving many more people access to treatment – a classic example of the supply-side effect.” From 1973 through the late 1970s, there was a huge reduction in kidney disease deaths.

His paper on the subject appeared in one of the top journals in health economics.

Recovering Investment Banker

Andersen’s passion for these topics began in his previous life as an investment banker. He covered pharmaceutical companies, sparking his interest in the economics of the drug and health care industries. To delve into the big questions he saw facing health care, he decided to pursue graduate studies in public health and health policy.

“My hope is my research will help decision makers understand that health insurance is not a luxury. It can genuinely affect people’s lives for the better – making them healthier and more financially secure.”

Article by Susan Poulos
Photography by Bert VanderVeen

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