Home Moral guidelines Refine cost sharing in health reform

Refine cost sharing in health reform


While the debate over Medicare expansion proposals has focused on coverage, a key feature of several proposals is the reduction or elimination of cost sharing. Senator Sanders’ Medicare-for-All proposal, for example, sought to eliminate cost-sharing for almost all health services except a maximum of $ 200 for prescription drugs. A similar bill from Representative Jayapal proposed to eliminate cost sharing altogether.

The elimination of cost-sharing has an inherent appeal given the growth in deductibles and co-payments over the past decades, which has made medical care increasingly unaffordable for patients and their families. Beyond discouraging patients from seeking care, cost-sharing is also linked to adverse health effects, including increased mortality. On the other hand, cost sharing remains a tool for limiting overconsumption, a phenomenon linked to “moral hazard” which translates the care requested beyond the appropriate or optimal level. Given the growing evidence regarding low-value care (which often involves expensive services in the ‘gray areas’ of medicine where guidelines are scarcer), some degree of cost-sharing to discourage wastage does indeed make sense. .

Given this tradeoff, how should policymakers view cost sharing in the context of Medicare expansion? For the government and the Medicare trust fund, which bear the financial risk of people using health care, cost sharing helps limit health care spending. However, when patients are faced with greater cost sharing, they typically consume less the two high value and low value care. Thus, simply asking patients to pay more does not necessarily make them more efficient buyers of more valuable care. Meanwhile, lower cost sharing can similarly encourage consumption of high and low value care.

One strategy is to better target cost sharing towards clinical situations with less valuable or wasted care, where moral hazard is a concern. Alternatively, another strategy is to reduce or eliminate cost sharing in clinical scenarios where patients generally have no plausible reason to use more care than they would in the presence of cost sharing. Beyond the classic examples of preventive services, which have long been the subject of a value-based insurance design, we describe two such cases in which cost sharing could be eliminated.

Two clinical examples

Insulin in type 1 diabetes

For 1.25 million Americans with type I diabetes, insulin is generally needed to avoid dangerous and costly complications such as diabetic ketoacidosis. While underuse of insulin clearly threatens health, so too does overuse of insulin, as hypoglycemia causes confusion, seizures, and even death. In such a clinical situation, where each individual with type I diabetes needs a precise amount of insulin and generally has no incentive to consume more or less, there is little room for moral hazard. and therefore little room for cost sharing.

In recent years, however, the direct costs of insulin have increased, largely in parallel with the growth in prices of manufacturers. In 2018, for example, 97,435 people with type I diabetes in the IBM MarketScan database paid an average of $ 423 per person in cost-sharing for insulin, compared to $ 289 per person for insulin a decade earlier. . During this time, evidence of patients struggling to afford insulin and ration their insulin supply surfaced, with little evidence of slowing overuse. In this example, eliminating cost sharing for insulin could likely save such a population about $ 41 million without risking abuse.

Trauma care

Acute trauma care is generally not elective, and cost-sharing of trauma services is unlikely to affect the demand for patients who need it. If acute trauma services were exempt from cost sharing, the incentive to overconsume them would likely be minimal. The National Injury Data Bank shows that 97 percent of injuries result from unintentional injury or assault. Thus, the demand for trauma care is likely to be generally unrelated to its consumer price. Yet trauma patients face disproportionate cost sharing. Between 2007 and 2018, in the MarketScan database, there were 1,359,928 trauma hospitalizations, with an average cost-sharing of $ 1,281 per hospitalization, almost 18% more than the average cost-sharing for hospitalizations among all other clinical indications. This added to more than $ 1.7 billion in cost sharing for emerging and presumably non-discretionary services where moral hazard likely did not play a significant role.

Some suggest that cost sharing encourages patients to choose the doctor or hospital offering the best price for a given level of quality. However, even if a patient wanted to buy and compare prices before receiving trauma care, this would usually be unrealistic. Trauma patients usually need immediate attention, and emergency medical services will often take them to the nearest facility. In short, eliminating cost sharing for trauma care would also make good sense.

Implications for policy

Overuse and low-value care contribute to the high levels and growth rates of healthcare spending in the United States, justifying cost-sharing as a tool in many clinical situations. However, it is a blunt tool, which could be fine-tuned in the context of proposals to expand Medicare. There are common clinical scenarios (eg inappropriate procedures, tests, or imaging) where financial incentives for providers to provide care could be constructively offset by declining demand. Here, cost sharing can both save money and improve health. In contrast, in scenarios where cost sharing makes less sense, including the examples above, it offers a barrier that poses potential harm to patients without the promise of mitigating moral hazard.

As part of efforts to expand Medicare, policymakers also have the opportunity to both better target the cost-sharing of unnecessary services and change its amount to increase, on average, the value of the care provided. This would build on the legacy of value-based assurance design by advancing the definition of high or low value from the level of service to the clinical situation level. In other words, rather than a given service (e.g. a test) being designated as high or low value, it would be the clinical circumstances around the service that would determine its value – for example, was the test used on the right patient at the right time with the right clinical indication. To the extent that it can discourage waste in common situations, a more targeted cost-sharing system could be a significant source of savings (one payment) to help finance additional coverage or other related purposes.

The key for policy makers and insurers is to determine which services – and in which clinical situations – should have some level of cost sharing. Most health care services are of high value in some situations and of low value in others. Indeed, even traditional preventive services such as age-appropriate cancer screenings can be overused and unnecessary if provided to patients who do not need them and are likely to have some degree of risk. moral. The Affordable Care Act (ACA) removed cost sharing for some preventive services such as vaccinations, contraception, and some cancer screenings from commercial health plans for all patients. A more modern health insurance program could specify not only which services should receive lower (or no) cost sharing (eg, insulin), but also when (eg, acute trauma care ). This advice could be generated by medical companies and clinicians on the basis of rigorous evidence, which could be more acceptable to providers.

Along with the current political debates around Medicare expansion, Medicaid expansion, and grant funding for the ACA Marketplace, opportunities for gradual, but still meaningful, reform remain. A clinically nuanced set of insurance design changes could better align the financial burden on patients with clinical relevance and encourage higher value use of our nation’s health resources.

Author’s Note

Preparation for this position was supported by the National Institutes of Health (Dr. Song, DP5-OD024564, P01-AG032952) and the Laura and John Arnold Foundation (Dr. Song).