Upfront Costs, Downstream Savings, and Financial Burden in Health Care

Session Submission Type: Panel

Abstract

This panel examines how health care policy and financing shape downstream utilization, spending, and patient financial burden. The four papers consider distinct but related mechanisms: whether high‑cost prescription drugs may offset future procedural spending, whether the timing of out‑of‑pocket costs contributes to medical debt, and whether payment reform incentives diffuse beyond directly treated providers and insurers through physician networks. Together, they highlight how pricing, coverage, and payment design affect both short‑term affordability and longer‑term spending, with implications for drug policy, cost‑sharing, and payment reform.The first paper, by Wing et al., asks whether rapidly expanding glucagon‑like peptide‑1 (GLP‑1) receptor agonists “pay for themselves” through reduced downstream medical spending. Using insurance claims data and a stacked difference‑in‑differences design, the authors compare new GLP‑1 initiators with not‑yet‑treated controls. They find no evidence of cost offsets over the first year or even five years. While GLP‑1 use reduces spending on other diabetes medications, overall non‑GLP‑1 spending rises, driven by greater outpatient care. The results suggest that payers are unlikely to see large savings from reduced medical use alone, underscoring the need to consider broader value channels.The second paper, by Cai and Wing, asks whether GLP‑1 therapy generates not broad medical‑cost savings, but granular, pathway‑specific offsets in orthopedic care. Using MarketScan commercial claims data from 2016–2024, the paper examines whether GLP‑1 initiation reduces joint replacement incidence or lowers 90‑day episode spending around hip and knee replacement among patients with osteoarthritis. The results will provide evidence on whether GLP‑1 therapy meaningfully reduces costly joint replacement procedures or downstream spending around these episodes, informing whether payers can design coverage and formularies to capture pathway‑specific offsets in high‑cost elective procedures.The third paper, by Horný and Lott, examines whether the temporal concentration of out‑of‑pocket costs drives medical debt. Using the Medical Expenditure Panel Survey, the authors develop a novel metric to quantify how household medical spending is distributed over time and test whether concentrated spending shocks are associated with difficulty paying bills. The results suggest that even modest annual out‑of‑pocket costs can create substantial financial strain when they are concentrated in short intervals, underscoring the role of liquidity constraints and the potential for policies that smooth cost exposure.The fourth paper, by Zeng, examines whether Medicare’s Comprehensive Care for Joint Replacement (CJR) Model generated spillovers through physician mobility and peer networks in New York State. Using HCUP State Inpatient Databases and hospital‑physician affiliation files, the paper shows that physicians indirectly exposed to CJR adopted discharge practices similar to those in treated markets, including reduced SNF use and increased home health referrals. These findings suggest that payment reform can reshape downstream care not only through direct exposure but also via professional networks that transmit practice change.

Policy Area

• Health Policy

Chair

• John Cawley, Syracuse University

Organizer

• Sih-Ting Cai, University of Southern California

Individual Presentations

• Do GLP-1 medications pay for themselves? - Presenting Author: Coady Wing, Indiana University

• Drugs vs. Surgery: Estimating the Joint Replacement Offset Value of GLP‑1 Therapy - Presenting Author: Sih-Ting Cai, University of Southern California

• Is Temporal Concentration of Out-of-Pocket Costs a Driver of Medical Debt? - Presenting Author: Michal Horný, University of Massachusetts at Amherst; Non-Presenting Co-Author: Catherine Lott, University of California, Berkeley

• Practice-style spillovers in surgeon care: evidence from lower extremity joint replacement surgery - Presenting Author: Ke Zeng, NORC at the University of Chicago