Costs and spillover effects of private insurers' coverage of hepatitis C treatment.

Objectives: Hepatitis C virus (HCV) treatment incentives for private payers may be misaligned because payers must bear immediate costs and may not realize long-term benefits. However, these benefits may accrue to future payers, including Medicare. We examined how and to what extent private payers' current HCV treatment coverage decisions impact Medicare's and private payers' future costs.

Study Design: Discrete-time Markov model.

Methods: We modeled HCV disease progression and transmission to simulate the economic and social effects of different private-payer HCV treatment scenarios on Medicare. The model examined differences between a baseline scenario (current practice guidelines) and 2 alternative scenarios that expand treatment coverage. Spillover effects were measured as reduced HCV treatment costs and medical expenditures in Medicare. We calculated the spillover effects and net social value of each scenario (total value of quality-adjusted life-years accrued over time minus cumulative treatment and medical costs).

Results: With expanded HCV treatment coverage, private payers experience reduced medical expenditures in the 3-to-5-year time horizon; however, they still face higher treatment costs. Over a 20-year horizon, private payers experience overall savings of $10 billion to $14 billion after treatment costs. The expansion of coverage by private payers generates positive spillover benefits to Medicare of $0.3 billion to $0.7 billion over a 5-year horizon, and $4 billion to $11 billion over a 20-year horizon.

Conclusions: When private payers increase HCV treatment coverage, they may achieve significant savings while inducing spillover benefits to Medicare. Future savings, however, may not motivate immediate treatment investments among private payers who experience high beneficiary turnover.