Patient Cost Sharing: An Overview

1. Patient Cost Sharing: An Overview Joy M. Grossman, Ph.D. December 3, 2003

2. The New Cost Containment Frontier • Shift from provider to consumer cost controls • Levers include: • Increasing employee premium contribution • Reducing covered benefits • Increasing cost sharing at the point of service • Employers focusing on last option • Lowers employer and employee premium contributions • Shifts costs to employees who use services • Reduces total spending by making patients more price sensitive

3. Recent Changes in Cost Sharing • Increasing copays and deductibles • Replacing copays with coinsurance • Applying cost sharing to a broader array of services • Enhancing prescription drug tiering • Increasing out-of-pocket maximums • New products, e.g. consumer directed health plans, tiered networks

4. Effects of Increased Patient Cost Sharing • Reduces both employer and employee contributions to premiums by: • Shifting costs on to those who use care • Creating incentives to reduce use • Current mechanisms don’t differentiate between needed and discretionary care • Can create financial barriers to needed care especially for people who are low income or are chronically/seriously ill • Long term effects on health status unknown

5. Cost Sharing Innovations • Reduce spending by giving patients incentives to use appropriate care while mitigating barriers to needed care • Link cost sharing to patient’s choice when there are options • More effective services/treatment options • Participation in care management programs • Efficient providers • Limit cost sharing for: • Needed care • Patients who “do the right thing”

6. Design Issues • Is there adequate clinical and other research to inform design? • Are employers willing to pursue such approaches? • Will innovations be used for small employers?

7. Implementation Issues • Can patients be provided with adequate information to make appropriate decisions? • How would more complex cost sharing affect the physician’s clinical decision making process? Can physicians steer patients towards appropriate care? • Would these innovations interfere with other (mostly provider focused) quality improvement efforts? • Are such innovations too complex to administer?

8. Broader Issues • What are the limits to savings from cost sharing innovations? • Might there be a backlash from consumers or providers? • Who is liable for determinations of medical effectiveness? • Could risk selection be a significant problem?

9. Sally Trude Presentation(click here)