2021 Schaeffer Center Annual Report

Uncovering COVID’s Overlooked Toll

At first glance, statistics appear to support the common perception that COVID-19 does its worst damage among the elderly and vulnerable. But these grim numbers mask another reality—and focusing on them has biased policy decisions and individual choices.

Schaeffer Center researchers found that elderly and younger adult populations have borne a significant burden from the pandemic when measured by years of life lost. In total, over 9 million years of life were lost in the first year of the pandemic, with adults ages 25 to 64 accounting for 51% of these lost birthdays.

The analysis leveraged the Schaeffer Center’s Future Elderly Model and Future Adult Model and was published in Annals of Internal Medicine.

“The focus on older people passing away from COVID misses the substantial burden COVID has imposed on younger people with chronic conditions like obesity,” Darius Lakdawalla says. “Many people have emphasized that protections like lockdowns and vaccinations ought to focus on the old and the vulnerable. However, our findings contradict the belief that this is a pandemic primarily of the elderly.”

Neeraj Sood is evaluating the impact of stay-at-home orders and other policy interventions aimed at stopping the spread of the virus. Published as a National Bureau of Economic Research working paper, his research finds that stay-at-home orders may have caused additional unintended harms and been largely ineffective in the U.S. in reducing excess mortality.

Understanding Disparities in Vaccination Rates

John Romley and Matthew Crane assessed the relationship between county COVID-19 vaccination rates and both social vulnerability and vaccine hesitancy to understand the link between these interconnected issues and vaccination uptake.

They found that nearly 20% of counties are associated with high levels of both hesitancy and social vulnerability and continue to be most at risk of failing to achieve high vaccination coverage. Furthermore, their analysis, published in Health Affairs, showed vaccine hesitancy and social vulnerability have independently impacted vaccine rates—an important finding for policymakers.

By early August, counties with high hesitancy had an average vaccination rate 17% lower than counties with low hesitancy, even after adjusting for the Center for Disease Control and Prevention’s social vulnerability index (SVI).

Meanwhile, disparities between counties with moderate to low SVI and high SVI were relatively smaller but have widened substantially. The coverage difference between low-and high-SVI counties increased from 1.8% in March 2021 to 4.6% in August 2021.

The way vaccines were initially allocated may also play a role in uptake, according to research by behavioral scientist Wändi Bruine de Bruin. She and Dana Goldman found that allocation practices may contribute to vaccine-hesitant individuals later refusing the shot when it is made available to them.

“Disinterest in getting the vaccine increased among all groups when they were overlooked and had to wait,” Bruine de Bruin says. “Even among people who initially wanted the vaccine, a surprising share—16%—said they no longer wanted it after they were passed over. Public health officials should keep this dynamic in mind when developing plans in the future.”

The study, published in the Journal of Risk Research, drew from consumer research showing that when people are overlooked during the initial allocation of a product they will lose interest. While COVID-19 vaccines are now widely available in the U.S., certain groups had to wait initially. In countries where supplies are limited, people are still waiting.

Contributing to the discussion about vaccines, Karen Mulligan and Jeffrey Harris authored a Schaeffer Center white paper evaluating the effectiveness of workplace vaccine mandates, finding that they are sound public policy. Furthermore, they argued, the federal government has an important role to play in endorsing these mandates while making sure vulnerable communities are protected.

Leveraging Rapid Antigen Testing for Schools

As we build a new normal, keeping kids safe in schools—while ensuring the best learning environment—is critical. Neeraj Sood led one of the first studies in the country evaluating the use of rapid antigen tests in children.

The tests show promise, especially if schools use serial testing, such as twice a week.

“Serial testing is critical because one-time antigen tests might not identify asymptomatic children at or shortly after the onset of infection,” Sood says. “But serial testing will likely identify these children as they subsequently develop high viral loads and become infectious a few days later.”

Sood presented his results to the California Department of Education as it was evaluating best practices for the state. He also presented at an expert panel for the National Academies of Sciences, Engineering and Medicine.

U.S. healthcare markets have many inefficiencies, resulting in both overuse and underuse of healthcare. The Schaeffer Center is conducting research to analyze the most appropriate market incentives for motivating individuals and stakeholders to improve the functioning of the healthcare system.

Adding Value to Older Heart Patients’ Lives

Traditional treatments for valvular heart disease—a condition affecting more than 13% of adults age 75 and older—have been open-heart surgery or symptom management. But less invasive options are available, an important development for patients considered too high risk for conventional surgery.

Schaeffer Center researchers evaluated the social value of transcatheter aortic valve replacement (TAVR), finding it has the potential to generate billions in social value. Yet uptake remains low.

“More than half of aortic stenosis patients are still being medically managed instead of receiving TAVR,” Darius Lakdawalla notes. Developing policies and procedures to incentivize TAVR use in appropriate patient populations should be an important priority for Medicare, he says.

Updating Regulation and Reimbursement

Millions of Americans rely on medical devices every day. Yet antiquated systems for regulating and paying for such advances can have serious consequences. For instance, shortages of COVID-19 tests have dramatically hindered the nation’s response to the pandemic.

To address these issues, the Richard N. Merkin, MD, Distinguished Speaker Series hosted a talk with Nonresident Senior Fellow and former Director of the Domestic Policy Council Joe Grogan and former Food and Drug Administration (FDA) Commissioner Scott Gottlieb. Erin Trish moderated the conversation, which covered the challenges faced by the FDA and the Centers for Medicare & Medicaid Services (CMS) in ensuring that effective devices can be brought to patients more quickly.

“It was the inability to scale the development and deployment of diagnostic tests [that] was really at the root of a lot of our challenges with this coronavirus,” Gottlieb said. “And it was largely a failure of the ability of the federal government to engage private industry early enough and do a handoff to private-sector medical-device manufacturers and get them into the game at the outset.”

Grogan noted the differences between drugs and devices in terms of regulation and payments. For devices, he noted, it “frequently takes multiple years, through several different bureaucratic agencies at CMS … to prove … that your device or diagnostic is appropriate for the Medicare population. And private industry keys off of Medicare for figuring out what to cover or not.”

New Leadership

Matthew Kahn, provost professor of economics at the USC Dornsife College of Letters, Arts and Sciences, will lead the Healthcare Markets Initiative along with Jakub Hlávka, research assistant professor at the USC Price School of Public Policy. Kahn is a nationally recognized environmental economist focused on urbanization, climate change, and the effects of these issues on health and quality of life.

“There is significant waste in the U.S. healthcare system,” Kahn says. “Through the Healthcare Markets Initiative, we will bring together thought leaders to identify solutions that improve health outcomes and efficiency. The future of healthcare in this country depends on new approaches to these tough issues—and leveraging market forces may provide some clear answers.”

Hlávka’s research includes work on innovative payment models for pharmaceuticals, health system reform and the study of inequality. For example, pharmaceuticals are priced uniformly by convention, but many medicines have different levels of effectiveness in different patients. This is one of many market inefficiencies in drug pricing. Analysis by Hlávka, Darius Lakdawalla and Dana Goldman focused on the economics of alternative payment models to uniform pricing and highlighted challenges policymakers, payers and other stakeholders should be aware of as these options are considered.

While implementation faces numerous challenges, including regulatory and data-collection constraints, they predict value-based agreements for pharmaceuticals will be relied on more extensively as solutions to the implementation challenges are identified.

Taking the Sting out of Surprise Billing

Patients have long suffered financial strain from exorbitant surprise medical bills stemming from out-of-network care. Collaborative work under the Schaeffer Initiative has informed numerous pieces of legislation at the state and federal levels to protect consumers from this practice, also known as balance billing.

The most sweeping of these is the federal No Surprises Act, which went into effect January 1, 2022. In addition to making it illegal to bill patients for more than in-network cost sharing for certain services, the legislation establishes an arbitration process to resolve disputes between providers and insurers. Following the bill’s passage, Schaeffer Initiative researchers continued to conduct analyses, examine the best ways to maximize its effectiveness and write recommendations for implementing the new law, many of which were adopted in the administration’s rulemaking.

In a piece for Medpage Today, Loren Adler and Erin Trish noted that most doctors don’t want to send balance bills to unsuspecting patients and that physicians not currently profiting from surprise billing “could see pay increases because of the law’s new out-of-network price support.”

Furthermore, the No Surprises Act will save money overall because it uses median in-network prices to guide payment decisions—a strategy outlined by the Schaeffer Initiative in early research. “The law is a big win for patients, employers and consumers,” Adler and Trish write.

Bringing Expenses Down to Earth

When it comes to emergency services, air ambulances account for some of the highest surprise bills. Lack of competition is a factor as, by 2017, just two private equity firms had gained control of nearly two-thirds of the Medicare market for air-ambulance transport.

Analyzing commercial insurance claims data for 2014–2017, Loren Adler, Erin Trish and colleagues found that emergency medical air transports owned by private equity or publicly traded companies were paid an average of $32,051—5.6 times what Medicare would have paid. This is particularly concerning given that 89% of transports provided by private equity or publicly traded companies during this timeframe were out-of-network.

Fortunately, air-ambulance providers are among those covered by the No Surprises Act, which will protect patients from these surprise bills going forward and should lower prices. However, more can still be done to protect patients and improve the market.

Surprise bills also routinely come from specialty services such as anesthesiology. A study by Adler, Trish, Erin Duffy and Bich Ly sorted through various payment methods for anesthesiologists and certified registered nurse anesthetists, examining 3.59 million commercial and 1.87 million Medicare Advantage claims for common anesthesiology services.

They found that the mean, in-network commercial charge was 659% of the Medicare rate, while the allowed payments were 314% of that rate. The researchers suggest that policymakers “choose out-of-network payment benchmarks prudently” to avoid inflation when using the No Surprises Act as a guide to rein in these expenses. This analysis fills a critical gap in understanding complex payment structures for anesthesiology which have made it hard to reliably compare amounts charged across payers and patient populations.

New Director Named

The USC-Brookings Schaeffer Initiative for Health Policy appointed Richard Frank as its new director in September 2021. He succeeds Paul Ginsburg, who will continue his impactful work for the Center as a senior fellow.

Frank joined the initiative from Harvard Medical School, where he is the Margaret T. Morris Professor of Health Economics Emeritus in the Department of Health Care Policy. His research focuses on the economics of mental health and substance abuse care, financing for long-term care, prescription drug policy, healthcare competition and disability policy.

“The Schaeffer Initiative has had remarkable success informing health policy debates under the leadership of Dr. Ginsburg,” Dana Goldman says. “These include issues such as surprise medical billing, the Affordable Care Act, market competition and drug pricing. Dr. Frank’s record of scholarship and public service makes him the ideal appointment to continue to advance our collaboration.”

From 2014 to 2016, Frank served as assistant secretary for planning and evaluation in the Department of Health and Human Services. His honors include election to the National Academy of Medicine’s Institute of Medicine, the Georgescu-Roegen Prize, the Carl A. Taube Award from the American Public Health Association and the Academy-Health Distinguished Investigator Award.

“With Dr. Ginsburg at the helm, the Schaeffer Initiative has informed policymakers and private-sector leaders about today’s most pressing healthcare issues,” notes Leonard D. Schaeffer, founder of the Schaeffer Center and the USC-Brookings Schaeffer Initiative for Health Policy. “I have no doubt that Dr. Frank will further enhance the initiative’s ability to provide the research and analysis needed to improve health policy at the national level.”

Forward-Looking Reforms

Richard Frank’s leadership of the USC-Brookings Schaeffer Initiative for Health Policy builds on successes achieved under Paul Ginsburg while also adding new priorities—including a focus on mental health. As one of his first activities, Frank and his colleagues submitted a letter to the U.S. Senate Committee on Finance in response to a white paper on mental wellbeing by Senators Michael Bennet (D-Colorado) and John Cornyn (R-Texas).

Frank and his colleagues recommend aligning Medicaid, block grants, state and local funds, and private insurance for mental health services, as well as building on existing payment mechanisms in public insurance programs to increase accountability. Doing more, Frank and longtime colleague Sherry Glied say, “requires policymakers to think creatively about the use of resources—workforce and technology—combine operating funds with infrastructure investments, and demand much more accountability from all providers and funders in the system.”

In a separate piece, Frank and Glied discussed the cost of mental illness in the workplace and the need for businesses to recognize the reality of mental health symptoms and allow for flexibility and accommodation at work. You can do this, they write, and still preserve productivity.

Prescription drug pricing reform continues to hold policymakers’ and the public’s attention. Loren Adler and Paul Ginsburg developed a framework for policymakers evaluating the wide range of proposals, noting the need for awareness of the trade-offs inherent in various policy options. One such trade-off is the balance between innovation and access. This is especially true in oncology, where accelerated approval of new drugs has the potential to improve cancer outcomes, but the cost is high and the value uncertain.

Frank proposed a model, published in JAMA, that would allow payers to only pay for cancer drugs that work. This would incentivize innovation while ensuring money spent on new therapies is well-used. In a piece published in the New England Journal of Medicine, Frank and colleagues elaborated on the trade-off between future innovation and regulating drug pricing.

“These challenges are created in part by our system’s failure to consistently establish prices that reflect treatments’ clinical and economic value,” they write.

Building Back Better Savings?

Among other initiatives, President Biden’s Build Back Better (BBB) act aims to expand Medicaid and Medicare by increasing subsidized marketplace coverage for the uninsured—especially in those states that have chosen not to expand Medicaid—as well as reforming prescription pricing.

Matthew Fiedler explored this proposal’s financial implications for hospitals. He estimated that the margins for hospitals in the 12 states that have not expanded Medicaid would improve by $11.9 billion if all related BBB proposals were put into effect, because they would be reimbursed for at least some services that currently go unpaid. However, BBB includes provisions to “claw back” some of this windfall through restrictions in other areas. By comparison, if Medicaid were implemented in these states, Fiedler calculated those hospitals would see $3.6 billion instead.

Fiedler also analyzed BBB prospects for adding hearing, vision and dental coverage to Medicare during congressional reconciliation and explored ways policymakers could cut the costs of adding this coverage without reducing its generosity.

Reinforcing the Affordable Care Act

Signed into law over a decade ago, the Affordable Care Act (ACA) expanded access to healthcare and insurance coverage to millions of people. Experts with the Schaeffer Initiative continue to analyze the effects of this complex legislation and offer evidence-based guidance aimed at improving the system’s functioning.

At least 2.2 million low-income people living in the 14 states that have not expanded Medicaid are still unable to receive coverage from either traditional Medicaid or the individual marketplace. Richard Frank and Sherry Glied evaluated the various options policymakers could use to solve this critical gap in coverage in an issue brief published by Commonwealth Fund. The piece has been a resource for policymakers as they discuss proposals.

Evaluating Private Equity Investment’s Impact on Markets

The growing number of physician-practice acquisitions by private equity has prompted concerns about potential effects on quality, prices and access to care.

Paul Ginsburg, Loren Adler, Erin Duffy and Samuel Valdez worked with colleagues to develop strategies for reducing the hazards of acquisitions, including closing payment loopholes that raise costs for consumers and taxpayers as well as strengthening antitrust and fraud enforcement.

However, since private equity also carries benefits such as capital infusions that could aid patient care, the authors urge policymakers to balance the advantages and disadvantages when considering such policies.

Data Core

The data core works to improve the quality and productivity of research through providing organized data resources, training and staff expertise. Including programmers, statisticians, analysts and a data resource administrator, the team has proficiency in the methods and programming necessary to rigorously analyze big data. Schaeffer Center fellows and students rely on this team for support on a range of projects.

Data Library and Data Security

The Schaeffer Center’s data library includes survey data, public and private claims, contextual data and electronic health network data feeds. The data core is a pioneering information resource and computing environment that meets exacting standards of excellence in data security through a mix of security measures—from an air-gapped workstation to state-of-the-art, Health Insurance Portability and Accountability Act (HIPAA)-compliant systems that include 24/7 monitoring to ensure resources are protected.

Health Policy Microsimulation

For more than a decade, the Schaeffer Center has been at the forefront of developing pioneering economic demographic microsimulation tools to effectively model future trends in health and longevity and answer salient questions in health policy. The centerpiece effort is the Future Elderly Model (FEM), which projects a rich set of health and economic outcomes for the U.S. population age 50 and older. The FEM was originally designed to answer questions about the long-term economic viability of the Social Security and Medicare programs. Schaeffer Center researchers have since used the FEM to explore an increasingly wide variety of policy questions, ranging from the fiscal future of the U.S. to the role that biomedical innovation can play in health outcomes.

The microsimulation team is building a network of collaborators to develop country-level, FEM-based models in nations around the world. This effort will allow researchers to compare demographic, health and economic trends on a global scale.

Researchers recently used the FEM to forecast long-term trends in disease dynamics in 15 countries. Focusing on investigating the consequences of policy and behavioral factors in healthy aging, including trends in chronic disease, education and behavioral factors like smoking, the researchers produced forecasting models that can be used by policymakers and stakeholders. Researchers involved in the project include two winners of the Nobel Prize in Economics, Daniel McFadden and James Heckman. This work resulted in eight papers published as part of a special issue of Health Economics.

Models have also gone local, with simulations conducted for California and Los Angeles County to help policymakers at the state and county levels understand trends and the impact of policy decisions.

Ultimately, the goal is to offer a tool to help policymakers weigh the pros and cons of potential policies, using actual evidence about impact when deciding where to put resources. Findings using the FEM and the related Future Adult Model have been published in top journals and cited or commissioned by government agencies, the White House, the National Academy of Sciences and private organizations interested in aging policy.

Data Partnerships and Collaborations

In addition to being a resource for Schaeffer Center researchers, the data core and microsimulation teams partner with local, state, federal and international collaborators to develop data projects and models. Key collaborators include the National Academies of Sciences, Engineering and Medicine, and the Los Angeles County Department of Public Health.