Cost-sharing can increase health care spending
When patients have to pay a share of drug costs: effects on frequency of physician visits, hospital admissions and filling of prescriptions
By Aslam H. Anis, Daphne P. Guh, Diane Lacaille, Carlo A. Marra, Amir A. Rashidi, Xin Li and John M. Esdaile
CMAJ
November 22, 2005
To accommodate continually rising prescription drug costs, various cost-containment policies have been implemented. One such policy, cost-sharing between patients and insurers, is common in developed countries. In addition to shifting expenditures from insurers (often governments) to consumers, this financing mechanism is appealing because it supposedly reduces expenditures for medically unnecessary treatments by making patients pay for a proportion of all expenditures and thus making them more cost-conscious.
The RAND Health Insurance Experiment was the first scientifically rigorous study that established the impact of cost-sharing for medical services. On completion of the RAND study, there was strong evidence to suggest that ill patients were less likely to seek treatment or be admitted to hospital if they had to pay a portion of the cost.
Health services researchers have been examining the effect of patient cost-sharing for more than 20 years. Costs can be shared for office visits, emergency department use and prescription drugs, among other things. In our study, we focused on the effect of cost-sharing of prescription drugs on overall health care utilization among elderly patients with existing rheumatoid arthritis. We found that these patients had fewer prescriptions filled but used more physician services during the period when they had to pay the dispensing fees for prescription drugs than during the period when all drug costs were covered.
Our findings indicate that physician visits and hospital services are economic substitutes for prescription drugs: during the period when patients have to pay part of all of their drug costs, the frequency of doctor visits and hospital admissions increases. Our results show that, in a predominantly publicly funded health care system, the implementation of piecemeal cost-containment strategies such as cost-sharing of prescription drugs might have the unintended effect of increasing overall health care utilization. As health system reform is being contemplated in Canada, and indeed worldwide, it may be wise to evaluate a policy that would apply to the whole system - first-dollar coverage for all services or cost-sharing for all services - as opposed to a hybrid or mixed policy.
http://www.cmaj.ca/cgi/content/full/173/11/1335
And… an important reminder of what we already know:
Adverse Events Associated With Prescription Drug Cost-Sharing Among Poor and Elderly Persons
By Robyn Tamblyn, PhD; Rejean Laprise, PhD; James A. Hanley, PhD, et al
JAMA
January 24, 2001
In our study, increased cost-sharing for prescription drugs in elderly persons and welfare recipients was followed by reductions in use of essential drugs and a higher rate of serious adverse events and ED visits associated with these reductions.
Comment: Cost-sharing has been shown to decrease health care spending, but it does so at the cost of impaired health outcomes. This study adds another important element to that equation. Cost-sharing not only reduces access to products and services, it can also result in increased utilization of substitute products or services which might result in an increase in overall health care spending.
The advocates of consumer-directed health care (CDHC) would likely recommend that cost sharing be applied to the substitute products and services to prevent this shift to higher cost utilization. But that would further impair affordable access and compound the degree of adverse outcomes.
Cost-sharing, in the form of deductibles, co-payments and coinsurance, are widely supported in the United States as being absolutely essential to controlling costs. But we already have extensive cost-sharing, which is expanding even more, and there is no evidence that global spending is being brought under control. Funds spent on providing patient access to beneficial services are not the source of excess spending in the United States. Instead, cost excesses are due to profound administrative waste, over-utilization of non-beneficial high-tech care, lack of an adequate, efficient primary care infrastructure, excess pricing of pharmaceuticals and some specialized services, and other factors that simply are not corrected by cost-sharing.
It is no secret that the single payer model includes several mechanisms that would slow health care inflation by attacking the real drivers of health cost inflation, and it would do so while improving access and outcomes for everyone. Cost-sharing may have popular support, but it’s bad policy, and it should be rejected.