Pro & Con: Are higher co-pays the answer to controlling medical costs?

YES: Higher co-pays reduce wasteful doctor visits, unnecessary expenses.

By E. Noel Preston

The most important way to control the rising cost of health care is to reduce utilization. This means fewer everything: fewer doctor visits, emergency room visits, X-rays, prescriptions, laboratory tests, surgeries and other services like CAT scans and MRIs. Insurance companies have known this for decades. Medical MBA candidates have written dissertations showing the most effective way to discourage utilization is to have a co-payment to keep people from seeking medical attention.

Today, Medicare recipients pay a monthly premium deducted from their Social Security checks for their basic 80 percent coverage. Many have an additional premium deducted for their 20 percent supplemental insurance coverage. After paying a $130 annual deductible, Medicare recipients can go to any doctor or emergency room they like, and pay nothing out of pocket.

One way to curtail utilization of Medicare would be to require a large enough co-payment — say, $40, which would be deducted from the recipient’s next month’s Social Security payment.

This means a Medicare recipient would have to really think about whether to seek medical attention. The patient, not a committee or bureaucrat, would be the one to decide whether medical care was appropriate.

Naturally the co-payment could be reduced or completely eliminated according to some governmental formula for the truly poor. If imposing even a nominal co-payment caused a sick person not to see a doctor, and that person later needed more expensive hospital care, imposing a co-payment for doctor visits would actually add to health care costs.

In November 2001, Utah’s Medicaid program began charging $2 co-payments for physician visits. Pregnant women were exempt. In February 2003, the co-payment was raised to $3. A 2004 study found imposing a $2 co-payment resulted in patients visiting a doctor less often (600 claims/1,000 physicians vs. 450 claims /1,000 physicians), and increasing co-payments to $3 led to even further reductions. There was no corresponding later increase in hospital claims.

In 2004, Germany began to try to reduce its demand for health care services by imposing a 10-euro charge (about $17) for adults for the first visit to a doctor in each quarter of the year. This fee covers further visits within the quarter, and thus is not the same as a per-visit co-pay. If the patient doesn’t visit a doctor during the quarter, he doesn’t need to pay the fee. A July 2009 study found “the probability of visiting a physician was significantly influenced by the implementation of co-payments: namely a 3.4 percent decline in the number of doctor visits.”

In 2007 the National Bureau of Economic Research studied a group of 70,000 retired public employees in California whose co-payments had increased and compared them with another 70,000 whose co-payments had not. The study found a $10 increase in an HMO plan co-payment reduced utilization by 0.13 visits per member per month, a decline of nearly 20 percent. In a PPO plan, a 10 percent increase in price was associated with a 14 percent decline in utilization. The study did find that increasing co-payments was associated later with increased hospitalization rates for patients with chronic diseases, and suggests that co-payments might be made lower for the chronically ill.

Whether health care is a right or a privilege is a matter of opinion. Everybody should have air conditioning, but they don’t — and health care, like electricity, is subject to the law of supply and demand. I think if the American people said everybody, including Medicare recipients, should pay something for medical care whenever we use it, Medicare costs would go down.

Any health care plan that does not reduce utilization by Medicare recipients is doomed to fail. If office visits are “free” for the patients and Medicare only paid doctors $1 an office visit, demand still would be greater than supply, and the costs would still go up. If demand is greater than supply, rationing is the inevitable result, and someone is going to have to go without.

Dr. E. Noel Preston is a semiretired pediatrician and a founding staff member at Northside Hospital.

NO: Discouraging treatment is shortsighted and leads to more costs.

By Peter J. Pitts

In the current national health care debate, let’s hope we never hear the words, “As Georgia goes, so goes the nation.”

Since 2005, Georgia politicians have been conducting a dangerous penny-wise, pound-foolish experiment with its state health program by hiking co-pays for brand-name prescription medications.

The results of that policy have been sicker, less productive state employees. These Georgians end up consuming more and costlier health care during the course of their lives, as their neglected conditions worsen.

The lesson here is that higher co-pays discourage patients from getting the treatment they need — especially when they reach upwards of $100.

Just consider what Daniel M. Hartung of Oregon Health & Science University calls the “co-pay effect.”

Professor Hartung and his colleagues analyzed the effect of even a small co-payment — $2 for generic drugs and $3 for brand-name drugs — for those pharmaceuticals that were available to Oregon Medicaid enrollees in 2003.

The co-pay fees were not required for patients who were unable to pay. The researchers examined pharmacy claims data on about 117,000 Medicare enrollees with conditions like depression, schizophrenia, respiratory disease, cardiovascular disease and diabetes.

They found that the patients’ overall use of prescription drugs decreased by about 17 percent after the introduction of the co-pay policy.

It should come as no surprise that any policy that encourages patients to stop taking their prescription drugs is a recipe for disaster.

There is already a growing national trend of Americans not adhering to their prescribed drug regimens.

A study by Wolter Kluwer Health found that fewer and fewer Americans are even bothering to fill their prescriptions.

In fact, during the fourth quarter of 2008, American patients neglected to fill 6.8 percent of their brand-name prescriptions — a 22 percent increase when compared to the previous quarter.

This practice — often known as prescription drug “nonadherence” — can have serious repercussions on a patient’s health.

For example, hypertensive patients who do not take their prescribed medicines as directed suffer 5.4 times as many poor clinical outcomes as those who do.

And poor outcomes are 1.5 times more common for heart disease patients who do not take their meds regularly.

This adds an additional $100 billion to $300 billion in health care costs each year.

The trend has been perpetuated by the fact the Americans with private health insurance have found themselves paying more for prescription drugs in recent years.

Why? Because insurance companies are paying less. In 2000, people under 65 with private health insurance paid 37.2 percent of their prescription drugs costs out of their own pockets.

Many Americans mistakenly believe that this increase in out-of-pocket expenses is the result of higher drug costs. The data reveal otherwise.

In fact, the growth in prescription drug co-payments outpaced the growth rate of prescription drug prices four to one.

It’s easy to see why plans to increase the co-pays for Medicare beneficiaries will also have serious adverse effects on the health of our seniors, as well as on our health care system as a whole.

Unable to afford their prescriptions, many Medicare enrollees will begin treating strict obedience to their drug regimen as a luxury, not a necessity.

As more and more seniors choose to abandon their treatment, health care outcomes will suffer, as prices soar even higher.

Making health care decisions based solely on cost is a losing strategy over the long term for both the state and for the health of its residents.

But maybe those are the kind of shortsighted, budget-driven results you get when cost-over-care bureaucrats run your health plan.

Peter J. Pitts is president of the Center for Medicine in the Public Interest and a former FDA associate commissioner.