Copays Break Law

By Mary K. Reinhart
The Arizona Republic, August 25, 2011

The three-judge panel of the 9th U.S. Circuit Court of Appeals said federal health officials failed to show how the copays, imposed in November after a seven-year court battle, served any purpose besides cutting the state’s Medicaid budget.

Raising copayments for more than 200,000 of Arizona’s poorest residents and making them mandatory, the judges said, helped balance the state budget but didn’t meet that federal standard.

“The administrative record reveals that the purpose of Arizona’s waiver application was to save money,” wrote Judge Richard Paez. “There is little, if any, evidence that the secretary considered the factors (federal law) requires her to consider before granting Arizona’s waiver. Thus, the secretary’s decision was arbitrary and capricious.”

The copays, which range from $4 to $30, were first approved by lawmakers in 2003 and were in place for about four months before a class-action suit was filed and a federal judge put them on hold. That stay was lifted in November by a separate appeals-court panel, which upheld a March 2010 ruling by U.S. District Judge Earl Carroll.

Since November, childless adults covered under the Arizona Health Care Cost Containment System, the state’s Medicaid program, and those who spend down their savings to become AHCCCS eligible can be turned down for medical care and medications if they can’t afford the copayment.

These are patients with incomes below the federal poverty level. Requiring a co-payment before access to care is permitted causes many of these individuals to go without medical care. It is appropriate that the Court of Appeals panel ruled that the HHS Secretary was “arbitrary and capricious” in approving the waiver that authorized the imposition of co-payments.

What is the purpose of co-payments? Some say that it is to prevent people from obtaining medical care that they don’t really need. Really? If a person has decided that she should see a physician, and she can afford the co-payment, would that really stop her from obtaining care? Highly unlikely.

Then is the co-payment for the purpose of raising revenues to help fund health care? The administrative hassle of processing co-payments offsets much of the gain that the co-payment revenues would bring.

Yet co-payments for low-income individuals clearly impair access to beneficial health care services. Thus co-payments provide little good and cause real harm.

Deductibles and coinsurance are another matter. For the very wealthy, they have no impact on health care access. But for middle-income individuals they are enough of a financial burden that they do cause patients to forego beneficial health care – obviously an undesirable policy.

How effective are deductibles and coinsurance in raising revenues to pay for health care? About 80 percent of health care is consumed by individuals who are no longer sensitive to the costs because they have already met their cost-sharing requirements. Thus they play a negligible role in funding our total national health expenditures.

The primary role that cost sharing plays in reducing health care spending is to prevent individuals from receiving care that they should have. (The value of reductions in non-essential services that result from cost sharing has been overstated since consultations with reassurance are still very beneficial health care services.)

So how much does foregoing beneficial care really save? Estimates based on the RAND HIE have suggested that the amount saved is about 30 percent. But 30 percent of what? It is 30 percent of the care consumed by healthy workers and their young healthy families, most of whom do not have major health expenses. Once you factor in the entire population, including all major medical disorders, the percentage of care that would be avoided is negligible.

Many other countries that spend far less while covering everyone do not have deductibles, co-payments, nor coinsurance. They have found them to be unnecessary in controlling costs. They are an insignificant revenue source, and they can cause harm, especially in vulnerable groups such as Arizona’s adult Medicaid population, and now in middle-income Americans who must live with the new standard of under-insurance.

It didn’t have to be this way.