When the very expensive - and very effective - hepatitis C medications hit the market more than two years ago, private health insurers limited prescriptions to the very sickest people.

Two new analyses now say that approach is shortsighted. Researchers, writing in the American Journal of Managed Care, argue that treating people during earlier stages of the disease has long-term health and economic benefits.

"Unfortunately, the conventional wisdom is, if there's an expensive drug, the way to ration it is to treat people who are sickest," says Darius Lakdawalla, a health economist and professor at the USC Schaeffer Center for Health Policy and Economics. "But it turns out that's kind of backwards from where the value really lies."

Lakdawalla and other researchers find that expanding hepatitis C treatment benefits private insurers in the long-term; by paying for the drug now, they avoid paying for costly complications from hepatitis C, like liver transplants, down the road. Curing patients' hepatitis C infections and avoiding future liver transplants has another benefit, they write: It frees up liver transplants for other people who need them.

But will such findings have any sway on the way insurers ration these and other expensive drugs?

Lakdawalla admits that's not likely to happen anytime soon, explaining that it all boils down to an accounting issue for insurance providers.

"It's because of perverse incentives in the health care system that make it very difficult for us to match up long-term benefits of cures and other treatments like cures, with the short-term costs that they impose," he says.

The group representing California's health insurers says the key issue is cost. It argues that the high prices for hepatitis C drugs greatly limit their public health benefits. More on that later.

A very straightforward problem'

First, let's dive into those two studies, which were published this month in the American Journal of Managed Care.

Using economic modeling, the researchers conclude that when private insurers expand hepatitis C treatment to include people with light scarring of the liver, as well as severe liver scarring and cirrhosis of the liver, insurance companies break even in roughly 16 or 17 years, and see net savings of $10 to $14 billion after 20 years. Medicare's costs are also reduced by $4.4 billion after 20 years, they find.

But there's a barrier to insurance companies taking this long view, they say: People regularly switch health plans, so insurers might not reap the long-term economic benefits of covering their members' hepatitis C treatments.

"It's a very straightforward problem: My insurance company today has to pay for the drug, but they're not going to be the ones 10, 15, 20 years down the road, when I'm actually reaping the benefits, in terms of an avoided liver transplant or reduced complications from the disease," Lakdawalla says.

This situation, he says, discourages insurance companies from investing in hepatitis C treatments for more of their members.

But the researchers' math "just doesn't add up," says Nicole Evans, spokeswoman for the California Association of Health Plans. 

"Our health care system spends about $17.5 billion on liver transplants, but it would cost about $150 billion to treat everyone with Hepatitis C even at a 50% discount," she says.

Investing in hepatitis C treatment also has positive spillover effects for people who need liver transplants for reasons besides hepatitis C, the researchers say in a second paper.

End-stage liver disease, they write, is the most common reason for liver transplantation; nearly 50 percent of these cases among transplant recipients are due to hepatitis C. Meanwhile, there's a scarcity of donor livers available for transplantation

Using an epidemiologic-economic model, they conclude that earlier access to treatment would prevent 10,490 liver transplants for patients infected with hepatitis C, with 7,321 spared livers going to people without the disease.

"If you have Hep C, and you get treated and your disease is cured, and you never end up needing a liver transplant, that's one more liver that can go to someone else with a different liver disease," Lakdawalla says.

"You ought to be treating everybody"

Lakdawalla argues that these findings underscore the value of expanding access to hepatitis C treatments, even to people with no liver scarring.

"We find that when you treat people [with no liver scarring] you get the most value out of any treatment strategy, which really does say, you ought to be treating everybody, in every single stage of fibrosis," he says.

The question of balancing short-term costs and long-term value extend far beyond hepatitis C, Lakdawall says. How insurers handle access to hepatitis C drugs could be a test case for how they deal with other medical advancements in the future, he says.

"This is not the last time that we're going to have a cure for a really important disease that is going to bring a lot of value to patients and impose an enormous amount of short-term cost," Lakdawalla says.

He says the country will need to figure out how to address these problems, or run the risk that pharmaceutical companies will stop investing in the research and development of cures.

Rebecca Plevin wrote this story while participating in the California Data Fellowship, a program of the Center for Health Journalism at USC's Annenberg School of Journalism.