Cancer Spending in Medicaid: From Unmanaged Problem to Untapped Opportunity

October 28, 2019 Dan McCarthy

To a Medicaid plan executive, it can feel like cancer drug spending is on a relentless march. It's hard to go a month without news of the latest million-dollar treatment, its potentially miraculous effects and the difficult questions it brings surrounding affordability and value. Already, cancer accounts for the third-most spending by Medicaid on specialty drugs, trailing HIV and hepatitis C. Many Medicaid plans see their cancer drug spend increase 10 to 15 percent every year, adding to the pressures of health care’s most financially stretched line of business.

Meanwhile, it's near-impossible for health plans—not to mention individual oncologists—to keep pace with rapid innovations in cancer therapies. Are newer drugs truly increasing patient survival, and if so, for which patients? Answering such questions takes a small army of experts to evaluate new treatments entering the market and sift through the relentless stream of new studies about existing drugs. Even if Medicaid plans weren’t already juggling dozens of other initiatives, it's not realistic to expect them to marshal the resources needed to stay on top of the field.   

These hurdles contribute to the perception that health plans can't reduce their oncology spend or ensure that patients are getting the most effective treatments. But that doesn't have to be the case. With the right tools and expertise, there is a huge untapped opportunity for Medicaid plans to rein in these costs while improving the quality of care that patients receive. We've uncovered these opportunities in recent months while engaging with Medicaid plans who were alarmed at their growing cancer spend and overwhelmed with the mind-boggling clinical complexity of the field.

Through these engagements, we have uncovered three key themes:

Medicaid plans are sitting on untapped opportunities to reduce costs and improve quality in oncology.

Analyzing prescribing patterns for cancer drugs across several Medicaid plans, we've found thousands of patient cases in which a high-cost regimen was delivered when a value-based clinical pathway would have brought the same or superior results at a lower cost. These pathways are vetted by a panel of national experts, and when physicians prescribe them, we can often achieve hefty savings. For example, we found that across thousands of patients receiving treatment for lung cancer in one year, the average cost of a regimen following a value-based pathway was roughly $15,200, versus $29,600 for off-pathway regimens that bring no significant improvement in survival.

In one plan with nearly 200,000 members, we discovered an opportunity to reduce year-to-year increases in cancer drug spending from 11% to 5%—saving $20 million over three years on drug costs alone. 

These savings add up: In one plan with nearly 200,000 members, we discovered an opportunity to reduce year-to-year increases in cancer drug spending from 11% to 5%—saving $20 million over three years on drug costs alone. In addition, the plan would save $3 million to $5 million over three years from avoidable hospitalizations, the result of more effective management of these patients, and of regimens that minimize complications of treatment, such as nausea and pain.

Upending traditional utilization management will improve oncology care, reduce costs and drive provider engagement.

The longstanding UM model relies heavily on denials for savings. These denials, not to mention the documentation and delays associated with prior authorization, frustrate patients and providers. They're also not enough to seriously cut into cancer drug spending over the long term.

To drive sustainable value in cancer care, we need to move from this one-dimensional, often adversarial UM approach to a programmatic model that aligns plans and physicians, clinically and financially. Value-based clinical pathways reduce friction with both the patient and provider, because they prioritize regimens that will be most effective, with the fewest side effects. It's only when comparing two equally effective regimens that the less expensive option is preferred. When this pathway is selected, the regimen is automatically approved. There’s none of the prior authorization hoop-jumping that can lead to long waits for treatment or, in other cases, denial of reimbursement to oncologists for drugs that were already administered. Yet physicians remain independent: They can select a different evidence-based regimen if they think it's best given the patient's circumstances.

In this physician-aligned approach, providers in your Medicaid network benefit financially when the plan does well. For example, an alternative payment model may give oncologists bonus payments that are tied to the quality of care and savings they deliver.

Medicaid plans are constantly working to ensure access to care for their members. By collaborating with oncologists, helping them make better prescribing decisions and reducing prior-authorization headaches, they can avoid the frustration that tempts doctors to see fewer Medicaid patients, or none at all.

Medicaid plans can tackle cancer care without sacrificing other key initiatives.

Medicaid plans have been thrust to the front lines of society's most challenging struggles. They're asked to take on the opioid epidemic, reduce maternal mortality and address social determinants of health, among other issues. Meanwhile, they’re facing pressure from state Medicaid agencies to eliminate waste and keep spending predictable. Why stretch their resources to take on the seemingly insurmountable task of controlling cancer costs?

Improving cancer care truly is difficult, but it doesn't need to take away from a plan's other initiatives. By engaging a partner who offers a purpose-built solution for oncology management, plans can ensure that a focus on oncology won’t be a zero-sum trade-off with other initiatives, such as behavioral health. An experienced partner ensures that clinical pathways reflect the latest evidence, engages oncology practices, and facilitates alternative payment models, among other roles.   

Once a cancer care solution is in place, it can deliver predictable savings. Many other Medicaid initiatives involve making systemic, long-term and community-centric changes that we believe will ultimately prevent health care spending. To rein in oncology costs and improve quality of care, however, the path to success is more straightforward: If oncologists select value-based pathways, then the plan will save while patients get top-notch care. Additionally, plans can turn cancer drug spending from one of the most volatile lines in their annual budgets to a more predictable one.

Ready to discuss the value-based opportunity at your plan? Let's talk.

About the Author

Dan McCarthy

Dan McCarthy is Chief Executive Officer of New Century Health, and he brings significant leadership experience with innovative healthcare companies to his role. Dan previously served as Chief Growth Officer where he was responsible for driving short- and long-term growth through business development, marketing, strategy and product innovation. Immediately prior to joining New Century Health, he was an early employee of Evolent Health, where he held various leadership positions in business development and health care delivery transformation.

Follow on Linkedin More Content by Dan McCarthy
Previous Article
Oncology Care First: What Providers Need to Know About CMS’ Proposed Model for Value-Based Cancer Care
Oncology Care First: What Providers Need to Know About CMS’ Proposed Model for Value-Based Cancer Care

Learn how CMS aims to increase risk, cash flow and predictability for practices while reducing administrati...

Next Article
Four Ways to Adapt to New Oncology Value-Based Models
Four Ways to Adapt to New Oncology Value-Based Models

Our CMO Dr. Andrew Hertler is quoted extensively in this Managed Healthcare Executive roundup of strategies...