Consumer cost-sharing

Thursday, May 01, 2014 12:16 PM

Colorado Health Institute report examines the effect of cost-sharing on health care costs

Kate Alfano, CMS contributing writer

Nearly one-fifth of the U.S. gross domestic product (GDP) is comprised of health care spending, but the return on investment in terms of overall health and health outcomes doesn’t measure up. That’s the rationale that led the Colorado Health Institute (CHI) to release a report in February 2014, “Sharing the Cost: A Changing Landscape.”

This report is the first in CHI’s Consumer Engagement and the Health Care System series through which they will analyze efforts to improve the quality and efficiency of the health care system with a focus on market-based solutions, and study whether these approaches lead to more engaged and informed consumers who take greater responsibility for their health and health care.

They seek to know whether programs that are successful in the private sector can be transferred to the public sector and whether these initiatives can lower the growth of health care costs in the United States while improving the overall health of its citizens.

“Sharing the Cost” delves into the issue of consumer cost-sharing. “Any discussion of rising health care spending is sure to touch on the concept of consumer cost-sharing,” the authors stated in the report, identifying the three common forms of cost-sharing as co-payments, where the consumer pays a fixed dollar amount for services; deductibles, where the consumer pays a specified sum each year before insurance kicks in; and co-insurance, where the consumer pays a percentage of all costs even after meeting the deducible. While insurance premiums generally are not considered to be an element of cost-sharing, the premium amount and the level of cost-sharing are related. “The idea behind it is simple: The more that people pay for something, the more that market forces kick in and the more they think critically about their purchasing decisions and demand greater value for their money.”

This has led to a drastic increase in health insurance plans with higher deductibles, higher co-pays and higher co-insurance. Colorado’s high-deductible plan enrollment reached 304,651 in January 2013, accounting for 8.4 percent of all private health insurance enrollment and placing Colorado in the top 12 states for private insurance enrollment in high-deductible plans. Nearly half of Colorado employers report that they offer high-deductible plans with deductibles of $1,000 or more. This is a reflection of a national trend; more people are opting for high-deductible plans.

CHI found that while cost-sharing can slow cost growth among healthy populations, it is not as effective among unhealthy populations. They report that increasing the level of cost-sharing leads to less use of medical care, which does equate to cost savings but comes at a risk of patients avoiding effective and appropriate care – some of which is preventive care that is covered by insurance. It contributes to worse health for low-income people who are already sick. And it motivates some people to select less-costly options such as generic drugs or fewer specialist visits, but fails to curb the highest users of medical care as they reach their deductibles quickly and then have no financial incentive to avoid more expensive services.

Available from AMA: Point-of-care pricing toolkit

As cost-sharing increases, it has become increasingly important for physician practices to collect payment at the time of service. The American Medical Association has made available a toolkit to help physicians and their staffs learn how to use electronic health care transactions, such as the electronic eligibility benefit inquiry and response transactions, to help facilitate point-of-care pricing and improve cash flow.

The AMA Point-of-Care Pricing Toolkit guides users through the process of collecting payment from patients at the time of service. Go to the AMA’s website, www.ama-assn.org, and search “Point-of-Care Pricing Toolkit” to access this resource.