Managed Care - March 2008 - (Page B3) Chapter 1 Principles of Health Insurance What is the purpose of health insurance? This chapter provides a brief review of the basic concepts of insurance and issues in health care financing to provide a context for the discussions in the following chapters about the value of and access to biologic therapies. Whoever provides medical care or pays the costs of illness stands to gain the gratitude and good will of the sick and their families. The prospect of these good-will returns to investment in health care creates a powerful motive for governments and other institutions to intervene in the economics of medicine…. On more narrowly commercial grounds, insurance companies also gain advantage from serving as middlemen. To be the intermediary in the costs of sickness is a strategic role that confers social and political as well as economic gains. — PAUL STARR, PHD, The Social Transformation of American Medicine, 1982 The history of health insurance in the United States is complex and dynamic, involving shifting alliances among numerous stakeholders — organized medicine, hospitals, labor unions, corporations, government, insurers, and patients. Over the years, these shifts have altered the makeup of insurance products, but the nature of insurance remains the same: To protect the beneficiary from infrequent, high-cost, catastrophic events. Biologic therapies, also known as biopharmaceuticals and specialty drugs, among other terms, would seem to fit into the rubric of insurance coverage; they are used relatively infrequently and they are costly. Yet insurers and plan sponsors do not universally cover them. Where coverage does exist, it often involves high cost sharing, potentially shutting off access to biologics for those who would likely benefit from them. From a business standpoint, premium costs must be controlled to make benefits available and to keep them affordable. But if the cost of biologics leads plan sponsors to place severe limitations on their coverage, then purchasers must ask themselves why this is necessary. What do their insurance premiums cover now, and what is the value of those benefits? How is the value equation changed when biologics are added to the mix? For employers, the benefits of efficient coverage — which can include reduced disability, greater productivity, and employee satisfaction — go well beyond what can be measured on a P&L statement. This publication examines these issues in the context of coverage of biologics. Policies governing coverage of biologics often are inconsistent with the purpose of insurance: to protect the insured against a catastrophic event. Scope and types of “insurance” The U.S. Census Bureau estimates that in 2006, 250 million Americans (84 percent of the population) were covered by some form of private or government health insurance or both (DeNavas-Walt 2007). On a per capita basis, the United States spends far more than other developed nations on health care, but by important measures — longevity and infant mortality, for instance — the United States lags in the overall health of the populace. This implies that insurance coverage, by itself, does not guarantee effective, efficient, or high-quality health care. It also suggests that purchasers of health insurance may not be receiving good value for their dollars (Schroeder 2007). In that regard, health insurance products that promote high-quality, appropriate care can be a catalyst for change. The United States may not be getting good value for its health care dollars. BIOLOGIC THERAPY MANAGEMENT 3
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