A post at “over my med body” (grahamazon.com) about the correlation between copays and adverse health outcomes pointed me to an interesting study published in the American Journal of Managed Care on the correlation between raising drug copays and decreased compliance.
Here’s the net – increasing copays for people on cholesterol-lowering drugs led to lower compliance. Lower compliance led to increased hospitalizations and other bad and costly outcomes. According to the report:
“Although many obstacles exist, varying copayments for CL )cholesterol lowering) therapy by therapeutic need (reducing them for those who would benefit the most) would reduce hospitalizations and ED use
Feb
11
Trapper – you are missing the point completely.
My point is that by not taking their cholesterol drugs, future costs are higher due to increased hospital costs.
And, if people don’t have any money in their HSAs, they can’t pay for drugs anyway.
I’ll walk you through this. Higher copays led to higher hospital costs. People chose to not spend money on their drugs.
Your inference about members “owning their costs” is naive. That’s not real world. In the real world they get sick and go to the hospital and all of us end up paying for the costs of their care that is not covered by their insurance.
I don’t know Coasian theory any more than I understand nuclear physics, and both are irrelevant to health care. Economically, health care is not like any other good or service – if you fail to understand this you will never be able to contribute to the solution.
high deductible plans are analogous to high copays for drugs – people will not spend money on preventive care and maintenance care, especially if they don’t have money to spend.
Therefore their ultimate costs will be higher due to more hospital and related expense. And the hospital’s costs will be shifted to other payers.
Joe,
I love this line, “Economically, health care is not like any other good or service – if you fail to understand this you will never be able to contribute to the solution.”
And I shall reply, “He who discards economics will always walk with his head in the clouds”.
– T
Tobias – And I shall reply, “he who fails to understand the nuances of health care economics will always walk with his head up his ass.”
I did not discard economics – I stated “Economically, health care is not like any other good or service”.
Please read the post before commenting.
Joe-
Economics, for the most part as well as probably for the most interesting part, is a method of analysis. What it is that you seek to analyze is for that matter secondary. It may be coke bottles, newspaper ads, or blogging software. In that sense, every “thing” can be analyzed through economics (subjective value theory, marginal utility, property rights, services etc).
By saying that health care ought to be treated as something entirely different from hair cuts or a can of beer, you implicitly yet necessarily advocate to look at other methods of analysis, such as a “common good”, “it’s more progressive”, “it’s good for everybody”, or “it’s the right thing to do.” If you didn’t discard economics, why did you express such a basic ignorance of Coasian theory and property rights?
Those non-economic approaches, for the most part, tend to entail non-rational methods suiting one’s ideology. When the efficiency and rationality arguments’ sway diminishes, other stuff is stressed that fits one’s pre-established notions.
And, yes, I do not know about the subtleties of health care economics; nonetheless, given what I said above, renders this irrelevant. And, wasn’t you that wrote that said that Coasian theory
– T
Trap, I’m forced to ask if you even read the article you cited. It said exactly the opposite of what you said it did and actually supported Joe’s point in this post:
“While people reported using health services at similar rates across health plans, adults with CDHPs and HDHPs were significantly more likely to report that they had avoided, skipped, or delayed health care because of costs than were those with comprehensive insurance, with problems particularly pronounced among those with health problems or incomes under $50,000. The survey asked whether in the last year respondents had delayed or avoided getting health care services when they were sick because of costs. About one-third of people in CDHPs (35 percent) and HDHPs (31 percent) reported delaying or avoiding care, twice the rate of those in comprehensive health plans (17 percent). Having a health problem made it more likely that people avoided or delayed care. Among people who reported being in fair or poor health or having at least one chronic health condition, those in CDHPs or HDHPs reported delaying or avoiding care at higher rates than those in comprehensive plans: 40 percent of those in CDHPs and 31 percent of people in HDHPs, compared with 21 percent in comprehensive plans. People with HDHPs and CDHPs in households with incomes of under $50,000 were also more likely to avoid or delay care: nearly half of those in CDHPs and more than two in five in HDHPs reported delaying or avoiding care, compared with one-quarter (26 percent) of those in comprehensive plans in that income range.
In addition to delaying or avoiding health care, people in HDHPs were significantly more likely to skimp on their medications than were those in comprehensive plans. The survey asked respondents whether in the last 12 months they had not filled a prescription because of costs. More than one-quarter (26 percent) of those with HDHPs said they had not filled a prescription because of cost, compared with 16 percent of those in comprehensive health plans (Figure 17). Having a health problem made it more likely that people avoided filling prescriptions, particularly those with HDHPs: One-third of those in HDHPs with health problems had not filled a prescription because of cost, compared with one-fifth (21 percent) of people in comprehensive plans.”
That’s a (rather lengthy) quote from the study you cited. In fact, that whole study talks about how total healthcare use is the same for each group, but out of pocket costs are way higher for those in CDHPs and that people in comprehensive group care found that their plan made it easier for them to incpororate costs into their decisions about treatment.
As for health economics, the reality is that as long as there is EMTALA, (which says that hospitals must treat patients in need of emergency care regardless of their ability to pay), creating systems where preventive pay is discouraged will only be more expensive for all of us. And I don’t see anybody having the political will to void EMTALA. We’re all in this together, whether you like it or not.
Toby – since you admittedly don’t know “about the subtleties of health care economics” your statements make for an interesting intellectual monologue, but not much else.
There are underlying drivers in health care that are unlike other economic goods. For instance, it is well documented that adding supply increases demand; price is essentially irrelevant, and as the payer has little influence on consumption, which is driven by the provider telling the consumer what to do (for the most part). You may argue that CDHPs bring price sensitivity into the equation, and I would tell you that the vast majority of expense is for individuals who’s costs will far exceed their health plan deductible, thereby making them unconscious of price, utilization, frequency or total cost.
And, when preventive measures are not taken, present laws (EMTALA) require society to pay for the additional expenses.
Finally, I take issue with your attempt to make this an ideological discussion. That is unhelpful at best. Show me facts, based on health care specific data, and don’t intellectualize about Coasian theory. This is health care policy in the real world, not an ivory tower. Take a lesson from Trapper – while he is not highly experienced in health care at least he does his research.
If you want to promote a position, you are far better off using facts than economic theory. I’ll go with the facts any day.
Well, that’s mildly embarrassing :) My quote was from the article below, which was also linked on the Heritage Foundation website in the same article. I must have gotten confused.
Early Experience With High-Deductible and Consumer-Driven Health Plans: Findings From the EBRI/Commonwealth Fund Consumerism in Health Care Survey
Joe,
Adding supply does not increase demand. The increased supply of health services over the last forty years is due to an increase in demand. You have your horse following your cart. The huge increase in demand directly results from an increase in government interaction in the health market place. Medicare created huge profit making opportunities for hospitals and clinics that did not exist before. Promoting employer based health plans through tax exemptions increased the demand for health services further.
In theory CDHPs will bring price sensitivity into the equation, but for many Americans, there simply are no prices on health services. Does this make health services different from other ‘economic goods’? Not at all, everything has a cost, even if there is no price available. The hospital menu, has no prices.
Health services are a good just like anything else, and the best way to allocate any good is through a market system. But first the market must be repaired. This includes defining property rights to both sides of the exchange. The consumer must take responsiblity for his purchases, by shopping wisely, but the providers must also be accountable for the price of their services.
Economics is not something that exist external to the real world, it is like Toby said, a method analysis. The problem with Health Policy today is that it is far too often writen by people like yourself who don’t know anything about economics.
This is getting tiresome. Economists practicing health policy is like priests practicing safe sex. They know all about it in theory, but their knowledge is purely academic, as is their understanding of the basic concept and sensitivity to the potential positive and negative outcomes.
Property rights – jeez, if you want to define a high white blood cell count, a mild fever, and headache as equivalent to a desire for a soft drink, when those symptoms could be meningitis, the flu, a staph infection starting out, or any one of a hundred other infections from mild to fatal, you’re a better diagnostician/economist than any physician alive.
I absolutely agree that a big part of the increase in health care expense is due to the Medicare program’s inception in 1965. That’s a “duh” statement But, that contributing factor was factored into the market more than three decades ago, and other factors long ago superseded the inception of Medicare. For example, the aging population, technology and the inappropriate adoption of same (see Health Affairs article on MRI adoption), the rise in the number of uninsured and the cost-shifting “hydraulic” that transfers their costs to private payers are the major drivers of health care cost inflation.
The problem with health policy today is that too many people who syle themselves as economists, and therefore experts on everything, make flat out wrong statements like “Adding supply does not increase demand. The increased supply of health services over the last forty years is due to an increase in demand.”
Here’s healthcare 101. Perhaps you have heard of John Wennberg, MD. Here’s an excerpt from his seminal study on hospital utilization in Boston and New Haven. (Lancet, May 23, 1987)
” The populations of New Haven and Boston are demographically similar and receive most of their hospital care in university hospitals, but in 1982 their expenditures per head for inpatient care were $451 and $889, respectively. The 685,400 residents of Boston incurred about $300 million more in hospital expenditures and used 739 more beds than they would have if the use rates for New Haven residents had applied. Most of the extra beds were invested in higher admission rates for medical conditions in which the decision to admit can be discretionary. The overall rates for major surgery were equal, but rates for some individual operations varied widely. These findings indicate that academic standards of care are compatible with widely varying patterns of practice and that medical care costs are not necessarily high in communities served largely by university hospitals.
There are many other reasons your position is naive and ignorant – there is little to no accurate data on what procedures, facilities, or providers provide optimal outcomes so buyers don’t know what to buy; it is often impossible for the layman to determine if a symptom or set of symptoms is an indicator of something serious; the most expensive patients cost far more than any deducible anticipated by the CDHP advocates, thereby eliminating any price sensitivity on their part; poor folk can’t afford basic insurance anyway so their care gets covered under EMTALA, and on and on.
I’m OK with ignorance, but not with snarky comments by ignorant folk.
I wish I could bill for this.