HealthLawProf Blog

Editor: Katharine Van Tassel
Concordia University School of Law

Monday, April 16, 2007

Cost-Sharing and Health Care

Ezra Klein posts some thoughts on why cost-sharing in our health care system should be something that all people support.  Not sure I completely agree but he does raise some interesting points.  He says,

Progressives tend to focus, rightly, on the access question. It makes sense for a number of reasons. One is that the worst of the cost crises won't materialize for decades, while the uninsured lack health coverage now. Another is that cost control is only possible within an integrated, more centralized system, and such a system is better sold on grounds of access than on overall cost.

But how to best control costs should be considered, even if it never becomes a preeminent political talking point. It must be considered not only because the health system will collapse unless spending growth slows, but because we spend too much on health care in the United States. We spend more than we need to, first of all, because our prices are so high and our system is so inefficient. But even if we could purchase care at wholesale rates and construct the most effective delivery system in the world, we would still be spending more than we probably should. On this, the data is clear: We purchase more care than really benefits us. . . .

In their zeal to beat back universal health care, conservatives have argued that the primary problem with America's health care system is, indeed, overuse. We're all so heavily insured and totally insulated from health care costs, the argument goes, that we overuse care and thus make the system more expensive. And so if we exposed individuals to more of the cost of care -- if we paid for our actual health care, rather than paying premiums for our health insurance -- we'd use less of it. This is why conservatives love health savings accounts, which have high deductibles, forcing individuals to pay more for their care and, as the thinking goes, eventually use less of it. . . .

That's what makes cost-sharing so tricky. You don't want to disproportionately penalize the poor, or keep them from seeking necessary care. You don't want to decrease the use of cost-effective treatments. You don't want diabetics to abandon their treatment regimens and require amputations, or for patients to drop their hypertensive medications and suffer heart attacks. Not only is it bad for the patient, it's costly for the system.  .. .

So the question is how to create a cost-sharing system that is not merely progressive, but smart. And some of the most exciting thinking on the subject comes from a new paper by the economist Jason Furman on "The Promise of Progressive Cost Consciousness in Health-Care Reform."

Furman proposes a health system in which households making about 200 percent of the poverty line would pay 50 percent of health costs until they reached 7.5 percent of income. Above that, all expenses would be covered. Below 150 percent of the poverty line, there would be no cost-sharing, and between 150 percent and 200 percent, the limit would be 5 percent of income. Furman estimates that his plan would reduce health spending by an astonishing 30 percent.

That's a lot of money. And I'm a bit skeptical that any achievable plan could trigger such dramatic reductions. But there's no doubt that moving money from premium payments to point-of-care payments would reduce the amount of health care purchased. And that's largely to the good: As discussed, the money can then be freed for other priorities, and the best evidence that we have suggests health outcomes would remain unharmed. And, if we do it right, they could even be improved.

The trick would be exempting certain conditions and treatments from the cost-sharing. For instance, it's cost-effective and medically important to encourage adherence to statin regimens (cholesterol-lowering drugs), and the evidence shows that co-pays compel some to stop taking the medication. So statins shouldn't be subject to cost-sharing. Indeed, the French system provides a useful model here, as it erases cost-sharing for various chronic conditions (like diabetes) and cost-effective medications (like hypertension treatments) where it's cheaper and more healthful to encourage health care use.

In order to do that, you need an integrated system capable of setting system-wide priorities. As Furman, in fact, says, in a surprising admission for an economist associated with the centrist Hamilton Project, "The simplest and cleanest way to implement income-related cost sharing would be as part of a far-reaching fundamental health reform. For instance, a single-payer system could easily incorporate [it]." Such a system would not only save money, it would likely improve outcomes as well. And there'd be nothing catastrophic about that success.

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