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Milliman Report on Oncology Care Costs

By May 3, 2016Commentary

About 14.5 Americans with a cancer diagnosis at some time were alive in 2014.  The five-year survival rate for all cancers has increased dramatically in the last 40 years.  People are being treated for longer and living longer, therapies are more expensive, and so it is not surprising that cancer treatment is costing more.  A report from actuarial firm Milliman looks at cost trends using Medicare and commercial health plan data.   (Milliman Report)   Overall cancer spending in the US has gone from $125 billion in 2010 and are projected to increase by 30% or more by 2020.  Comparing the cost of treating cancer to overall health spending reveals that from 2004 to 2014, the growth in each was roughly equivalent, so cancer as a disease is not an over-contributor to national health spending.  Growth in cancer treatment spending over this period is driven by chemotherapy drugs, especially biologics, but spending in other categories, such as inpatient care, has slowed.  The percent of total cancer spending represented by biologics rose from 3% to 9% for Medicare from 2004 to 2014, and went from 2% to 7% for commercial insurers.  And the new drug pipeline is full of many more expensive cancer therapeutics.  Hospitals have been aggressive acquirers of oncology practices, and once acquired, the services billed by these practices shift to higher cost hospital outpatient fee schedules from community fee schedules.  The portion of chemotherapy infusions performed in the hospital outpatient setting rose by 30% during the study period.  This trend has driven Medicare spending for infused chemotherapy treatment 7.5% higher, and commercial spending 5.8% higher, than they would have been had sites of service in 2014 been what they were in 2004.

So here we have the confluence of two great health care trends:  hospital vertical integration leading to higher prices and drug company pricing of biologics, often in the tens of thousands of dollars for a course of treatment.  The first could be partly fixed by paying the same for chemotherapy regardless of the site of service, the second, short of price controls, I am not sure how we deal with.  And it is not just health plans who bear the brunt of these changes; consumers end up paying much higher cost-sharing amounts.

Join the discussion One Comment

  • Bill Parker says:

    Until managed care creates a fair reimbursement system for physician office administered drugs, it becomes an economic decision to stop in office infusions. Home infusion is a poor alternative. The only place to go is the hospital. But payors don’t want to open hospital reimbursement contracts just to address this issue. At the present time, unless managed care wakes up, we’ll see this information reported every year.

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