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Cost Sharing in Insurance Coverage for Precision Medicine

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  • Mark V. Pauly

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.

Suggested Citation

  • Mark V. Pauly, 2017. "Cost Sharing in Insurance Coverage for Precision Medicine," NBER Working Papers 24095, National Bureau of Economic Research, Inc.
  • Handle: RePEc:nbr:nberwo:24095
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    Cited by:

    1. Jui-fen Rachel Lu & Karen Eggleston & Joseph Tung-Chieh Chang, 2018. "Economic Dimensions of Personalized and Precision Medicine in Asia: Evidence from Breast Cancer Treatment in Taiwan," NBER Chapters, in: Economic Dimensions of Personalized and Precision Medicine, pages 237-272, National Bureau of Economic Research, Inc.
    2. Rositsa Koleva-Kolarova & James Buchanan & Heleen Vellekoop & Simone Huygens & Matthijs Versteegh & Maureen Rutten-van Mölken & László Szilberhorn & Tamás Zelei & Balázs Nagy & Sarah Wordsworth & Apos, 2022. "Financing and Reimbursement Models for Personalised Medicine: A Systematic Review to Identify Current Models and Future Options," Applied Health Economics and Health Policy, Springer, vol. 20(4), pages 501-524, July.

    More about this item

    JEL classification:

    • I11 - Health, Education, and Welfare - - Health - - - Analysis of Health Care Markets
    • I13 - Health, Education, and Welfare - - Health - - - Health Insurance, Public and Private
    • O32 - Economic Development, Innovation, Technological Change, and Growth - - Innovation; Research and Development; Technological Change; Intellectual Property Rights - - - Management of Technological Innovation and R&D

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