Personalized medicine and treatments for rare diseases — many of which are extraordinarily expensive — are a growing part of the U.S. health care landscape. This trend has important ramifications for the out-of-pocket prices (e.g., copays and coinsurance) that insurers require patients to pay.
Will Personalized Medicine Mean Higher Costs for Consumers?
In theory, insurance markets are meant to spread the cost of health care across all patients. Unfortunately, in reality, patients frequently face significant out-of-pocket costs for expensive specialized treatments, even when they’re covered by otherwise generous insurance policies. This problem is likely to get worse as personalized medicine becomes more common (as the fixed costs of drug development and production are spread across smaller populations of patients), and as more patients get to choose between competing private health plans, while employers shrink the coverage they offer employees. To make out-of-pocket costs manageable and new personalized treatments accessible, we need policies that shift insurers’ financial incentives. Risk adjustment and reinsurance are the most commonly used policies for shifting insurers’ financial incentives in this way — but how they’re currently used leaves a lot to be desired.