Once upon a time, if you wanted to see a doctor you shelled out cash, a chicken, a handful of gold coins, a promise of future services in return, whatever the exchange medium du jour, and you saw a doctor. Then along came medical insurance, wherein you bet ahead of time on the probability that you might need services in the future. Then along came HMOs, PPOs, and finally today: the highly profitable health insurance company, and an ironic throwback to the past - ever-increasing cash costs on the part of the consumer in the form of premiums, deductibles, and copays.
The increase in consumer contribution for insurance products has a profound effect on the utilization of health care, and ultimately, how much that care costs. A double-edged sword is an understated metaphor in this case; a medieval battle axes might be a better analogy: all edges and pointy parts and blunt ends that cut and bludgeon in several different directions at once.
The first and most obvious effect is that people tend to use services less if they have to pay for it themselves, and more if it’s free. This effect alone swings both ways: on one hand, people may over-utilize health care services if they have no part in paying for their care; on the other hand, people may under-utilize services if they do not have the basic funds to pay the share asked of them. This plays out in some interesting ways in the doctor’s office: it is not unusual for patients on zero-copay plans to ask for prescriptions for over-the-counter medications like ibuprofen (which costs pennies per pill out of pocket) because it is free if they have scrip in hand; there is also the often remarked-on (but rarely witnessed, and most likely apocryphal) phenomenon of Medicaid patients hitting up a second or third urgent care if they don’t get antibiotics from the first, because it costs them nothing but time to do so.
Conversely, a patient on a high-deductible (or high-copay) plan is likely to under-utilize services, and this is often a far more dangerous – and ultimately expensive – proposition. This is the patient who avoids a primary care copay for a respiratory illness only to end up in the emergency department with pneumonia, or the patient who puts off a recommended colonoscopy only to end up with colon cancer that could have been removed as a polyp if preventive care had been pursued. Insurance companies often limit their liability on these cases by setting lifetime limits, and otherwise capping how much they may have to shell out for early care delayed.
A similarly tangled net of motivation surrounds compliance with treatment that individuals pay for or receive for free. Set the financial bar too high, and patients are unlikely to follow doctor’s suggestions at all; however, there is also a reverse effect: if you make a person pay a little for their medication, they may place more value on it than if they got it for free. Some studies (albeit with major confounders) suggest higher rates of compliance for more expensive medications, not lower rates, because people don’t throw away stuff they’ve invested in.
Throw another twist onto this mire: some services have several equivalent varieties that come at highly variable cost, and the way in which you proportion out that cost to the consumer profoundly affects the services they engage in. You can pay, for example, less than $5 a month for a generic cholesterol drug; you can also pay over a hundred dollars a month for brand-name Lipitor or Crestor, and most patients would be hard-pressed to tell you on what grounds you should choose the $5 version or the $100 version. Most insurance companies align their own financial good with overall cost-control by charging the patient more for the expensive stuff, as most patients do not need the expensive stuff for basic conditions like allergies, blood pressure, cholesterol, and early diabetes care. But the pharm companies end-run this planned utilization by handing out coupons that cover the copay for branded drugs like these…a superficially charitable act which really serves to shift cost off the consumer for drugs that the average patient should not require in the first place. Most patients would choose the $5 version over the $30 copay for the $100 version – but if their copay goes to zero for the expensive stuff, the best deal becomes the one that costs the system far more than it should, even if the individual saves a few bucks. (This is also the principle behind free samples of branded medications: get people comfortable with the expensive stuff so that eventually they prefer it to the cheap stuff.)
One more layer of complexity, please if I may: in an era of increasing deductibles and copays, paired with one of the harshest economic environments in the last half-century, the net effect on health care utilization by increases costs to the consumer is not additive – it is exponential. Under usual economic modeling, adding a hundred dollars to the cost of a medical product would simply shift demand a little bit – a few people would rationally drop out of the market, wait, put off, decide they don’t need a service. Under the current circumstance, the confluence of unemployment, higher premiums, higher deductibles and high-deductible plans has created something explosive: a whole class of people who are “insured” but who (by choice or force) receive no care at all – or who undergo radical economic hardship any time a health issue arises. This is a small but significant part of why the major insurers have seen record profits for three years running even in the midst of a radical downturn in the rest of the economy, and no small part of why these are not popular players on the health care stage: with high-deductible plans, they are able to collect premiums on plans that patients will not, or cannot, ever utilize.
The overall question then becomes: how do we set copays and deductibles to best motivate consumers and providers toward maximal utilization – that is, using resources judiciously but without impairing necessary care?
First of all, high-deductible plans are almost always a bad idea. They are often the province of older workers waiting on the Medicare years, who can (if not comfortably) cough up the $5000 deductible for a major illness. It just so happens that this is the same population for whom preventive care is ramping up – and at least in my experience, it is the patients with high-deductible plans who put off mammograms, colonoscopies, routine lab screenings, and care for early signs of disease because these so rarely seem justified given the 100% out-of-pocket cost. Conversely, younger consumers tend to need less routine services, but also tend to have less fluid cash or savings they can dip into to meet that large deductible. The only time these plans work well is when the patient is merely lucky: healthy, and happens to stay that way until some better insurance product falls into their hands.
Second, transparency of cost of is vital to cost control. Consumers should know how much their care costs, and if equivalent options at various prices are available, the cheap ones should cost less to the consumer unless there is compelling reason why they need the more expensive one: as unpopular as this may be, this is key to reigning in cost control nationally, and cannot be avoided.
Third, we can use evidence-based modeling to set premiums, deductibles, and copays to best effect optimal utilization for different population groups. You better bet the insurance companies have past human behavior in mind when they raise rates by double digits even in the harshest of economic times; similar approaches can be used to set sliding scales for contributions from people on various ends of the scale, especially in the vast government insurers: Medicare, Medicaid, Tricare, the Veterans Administration, S-CHIP, and the like. Some people should be paying nothing for care, because even a five-dollar copay on their part may be disastrous for them and the rest of us (eg. adults living in urban homeless shelters, where the most innocent cough can be a red flag for tuberculosis). Sliding up the scale, others should be throwing in a little or even alot more: it prevents overuse, and gives that little kick of compliance that may otherwise be missing.
Overall, health care cost distribution should depend on the same parameters we would like to think that all medicine should be based on: rational, sane planning rooted in the evidence we have, adjustable to a constant stream of feedback, and bent of servicing the health of the greatest number of people possible…parameters which alternately dovetail and clash with the profit motive that drives a majority of insurance providers today. Finding ways to bend these priorities away from profit alone and back around toward the achievement of optimal health outcomes…that is the crux of the issue.
