The argument for cost sharing is that people overuse healthcare when they don’t have to pay for it. But with cost-sharing, people also reduce their use of necessary healthcare, and are often left frustrated with their coverage. Numerous studies have also shown having less cost-sharing leads to better clinical outcomes, and overall cost savings in some cases. Everyone wants to contain costs, but cost-sharing can make people skip needed care, cause distress and increase long-term health costs.
Most health plans fail to separate cost-containment from cost-sharing. Cost-containment refers to reducing healthcare costs while cost-sharing refers passing the costs on to individuals. Any effort to make consumers pay for healthcare is cost-sharing, unless it actually contains or reduces overall costs.
Cost-sharing results in a reduction in important services, according to the RAND Health Insurance Experiment, which is the only randomized trial on cost-sharing. More recent work has shown that cost-sharing reduces essential screening for breast and colon cancer, reduces medication adherence and may increase overall costs. For example, even a small copayment sharply reduced the rate of mammogram screenings. Similarly, high -deductible health plans are associated with a downward trend in recommended cancer screening. Studies show that eliminating or reducing copayments improved adherence to diabetes and HTN medications. In contrast, increasing co-payments for drugs reduced the use of anti-diabetes medications by 23% and anti-hypertensive medications by 10%. Increasing cost-sharing with employees for anti-cholesterol drugs led 21% of users to stop taking the medications all-together (11% stopped in control group). Most importantly, more cost-sharing for these drugs led to worse control of blood pressure, more ER visits, and higher mortality.
Meanwhile, eliminating copayments for medications after a heart attack reduced the rates of heart attack, stroke and did not increase overall costs. One large U.S. employer eliminated some co-pays in 2002, and saw a 26% reduction in emergency department visits. It also saw a slower rate of growth of overall health care costs compare to comparable employers (8% versus 12% to 15%). The result of this research is a clear consensus that there should be no copayments for preferred medications and no copayments involved in preventive care. The ACA wisely mandates plans to provide free preventive care.
Despite this evidence, cost-sharing has been growing in U.S. healthcare. Employers are increasingly offering plans with higher deductibles. Only 8% of U.S. employers offered high deductible health plans in 2005 while 43% offered them in 2013. The Kaiser -Family Foundation found that these high deductible plans do slow the growth in employer costs, but don’t reduce total health costs, and lead employees more dissatisfied. This dissatisfaction is not rooted in cost alone; employees don’t understand their benefits.
Cost-sharing sometimes actually contains costs. There are some settings in which asking for a copayment makes good economic sense to reduce unnecessary emergency department use and reduce the use of branded, non-preferred drugs. A study published in the New England Journal of Medicine reveals that having to make a small emergency department copayment is associated with a decline of about 15% in emergency department use among patients with conditions that are not considered likely to present an emergency.
A smarter, more transparent, health plan would eliminate cost-sharing and implement only the evidence based tools for cost-containment. Our goal should be to improve health and reduce costs. It’s time to call an end to cost-shifting, and the industry tactics that leave all of us confused about the true cost of our health plans. q
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Dr. Rajaie Batniji is the co-founder and chief health officer at Collective Health, a cloud-based employer self-insurance platform that empowers companies to take control of their healthcare benefits. Collective Health enables employers with more than 100 employees to achieve health insurance independence. Collective Health’s approach is shaped by Rajaie’s academic and professional careers as both a physician and as a political economist. Dr. Batniji is also a clinical assistant professor at the Stanford University School of Medicine, where he previously trained in Internal Medicine, and served as a resident scholar at Stanford’s Freeman Spogli Institute (FSI). Dr. Batniji received a DPhil in International Relations (Political Economy) from Oxford University, where he was a Marshall Scholar, an MD from UCSF, and BA and MA degrees from Stanford University.