ECONOMIC WINNERS AND LOSERS AFTER INTRODUCTION OF AN EFFECTIVE NEW THERAPY DEPEND ON THE TYPE OF PAYMENT SYSTEM

An effective therapy for a costly illness has economic consequences. T here may also be differences between provider costs and payer costs an d initial versus long-term costs; costs may also vary with the reimbur sement scheme. Consider the case of an effective therapy to prevent re stenosis after coronary angioplasty. Assume that the initial provider cost of angioplasty is $12,000 and that restenosis within 6 months res ults in repeat angioplasty in 20% of cases, with a follow-up cost of $ 2,400, or $14,400 total. Assume that a therapy costs $1,000 per angiop lasty and decreases restenosis by 50%, resulting in repeat angioplasty in 10% of cases. This will result in an initial cost of $13,000 and a followup cost of -$1,300, or $14,300 total. The total societal costs will be -$100, a slight savings. Thus, the $1,100 cost of therapy is o ffset by reduced costs associated with restenosis, and the societal co sts are almost neutral. Assume that under fee for service providers ch arge costs plus 10% and that without the new therapy either a package price or a capitated;system is revenue neutral. Changes in costs resul ting from therapy to prevent restenosis are as follows (plus sign indi cates cost or loss; minus sign indicates savings or profit): [GRAPHICS ] Under fee for service, the payer takes the risks, and the economic c onsequences to providers are minimal. The situation is reversed under capitation. For whoever takes the risk, there is an initial toss to pa y for the therapy, but a long-term gain due to less restenosis. Under package pricing, the providers lose because of the cost of therapy and fewer procedures, while the payers gain. A new therapy, even if it is revenue neutral to society overall, may have considerable economic co nsequences, which vary with time and with the different perspectives o f providers and payers.