Higher Copayments Research Articles

Financing Childhood Health Supervision Services in the 21st Century

Pediatricians view their communities with a unique perspective, being the only professionals who interact consistently with preschool children and their parents when providing early childhood health supervision services. This supplement, reporting the findings of the National Survey of Early Childhood Health (NSECH), is a landmark publication that improves our understanding of early childhood health supervision services. The findings indicate marked variability in health supervision visits: the topics and amount of time devoted to counseling or anticipatory guidance, the types of services, and the overall quality of the services. Although many factors influence this variability, including varying recommendations among governmental organizations and professional societies and a lack of consistent physician training, fiscal considerations also exert a powerful effect. This commentary explores how fiscal policies compromise the quality of the early childhood health supervision services and suggests financing approaches to promote the delivery of high-quality services. Currently, several fiscal policies aimed at containing health care expenditures compromise the delivery of quality pediatric health supervision services. These include family out-of-pocket expenses for health supervision services in the form of higher copayments and deductibles, excluding health supervision services from the benefits covered in the insurance plan, and reducing physician payments for pediatric services. These policies are counterproductive, increasing “downstream” expenditures while doing nothing to moderate the more powerful drivers of health care expenditures: hospital costs, pharmaceuticals, new medical technologies, and home health care. Inadequate pediatrician reimbursement in both the private and public health care sectors produces compensatory mechanisms that have an adverse impact on health …

Predictors of satisfaction of health plan members with prescription drug benefits.

Relationships between sociodemographic and health plan characteristics and health plan member satisfaction with prescription drug benefits were studied. A survey was mailed in November 2002 to a stratified random sample of 14,141 people covered by a pharmacy benefit management company (PBM) who had made at least one prescription drug claim during the second quarter of 2002. Survey recipients had commercial health insurance and were 19-64 years of age. Participants were stratified by drug benefit plan design (two-tier copayment system, three-tier copayment system, coinsurance, or closed formulary). The survey contained 39 questions covering satisfaction with the prescription drug benefit, health-related attitudes and knowledge, and experience with the benefit. Predictors of satisfaction were examined by using logistic regression with probability weights. A total of 3819 surveys were returned (response rate, 27%). Respondents were more likely to be mail-order pharmacy users and less likely to be enrolled in a plan with a closed formulary. Out-of-pocket costs were viewed as the most important feature of the pharmacy benefit. In the logistic regression, higher copayments, coinsurance, closed formularies, intensive managed care, large health care premiums, a recent increase in copayments, and a recent denial of coverage were associated with lower satisfaction with the prescription drug benefit. Excellent health and use of mail-order pharmacy were associated with greater satisfaction. The extent to which health plan members served by a PBM had to share drug costs was the strongest determinant of satisfaction with the prescription drug benefit.

Incorporating life care planning concepts in case management

Now more than ever, the fabric of our health care system is fraying from challenges that are closing in and demanding solutions. After years of managed care controls, we have health care inflation in the double digits, the percentage of the gross domestic product that goes to health-related issues continues to rise, insurance companies are predictably responding to the crisis with increases in premiums to employers, and employers are shifting more of the burden for these increases onto the employee with higher copayments, higher deductibles, limited benefits, and limited choices.

The insurance effect on prescription drug expenditures among the elderly: findings from the 1997 Medical Expenditure Panel Survey.

Despite continuing debate over a prescription drug benefit for the Medicare program, there has been relatively little research estimating the potential cost of providing such a benefit. The objective of this study was to estimate the effect of prescription drug insurance on outpatient prescription drug expenditures among the elderly. We studied respondents aged > or =65 years to the 1997 Medical Expenditure Panel Survey, a representative survey of the U.S. noninstitutionalized population. Survey-weighted linear regression models were used to estimate the probability of any expenditures and total expenditures while controlling for sociodemographic characteristics, chronic conditions, and health status. We used prescription drug insurance status and outpatient prescription drug expenditures. An estimated 34 million elderly people filled 630 million prescriptions in 1997. Thirty-seven percent did not have prescription drug insurance. Total prescription drug expenditures exceeded $23 billion. Persons without prescription drug insurance spent slightly less than $7 billion; those with insurance spent more than $16 billion. After controlling for health status, comorbidity, and demographic characteristics, prescription drug insurance increased expenditures by $183 per person. The marginal increase in total expenditures of extending the average observed benefit to those currently uninsured is $2.3 billion (95% confidence interval, $1.2-3.5 billion). Proposals for a Medicare drug benefit provide high copayments to protect against insurance effects and to address uncertainty in cost estimates of the proposed benefit. By quantifying the insurance effect on expenditures among the elderly, the data reported here could reduce uncertainty in the budget estimation process.

Reinvention of Health Insurance in the Consumer Era

The private health insurance industry in the United States has fundamentally changed its strategic focus, product design, and pricing policy as a result of the backlash against managed care. Rather than seek to influence the behavior of physicians through capitation and utilization review, the major health plans now seek to influence the behavior of patients through benefit designs that cover a broad range of services but with high co-payments, tiered network designs that cover a broad range of physicians but with variable coinsurance, and medical management programs that provide incentives for patients to better manage their own health care. Premium prices are carefully adjusted to cover the expected costs of care for each type of product and each class of patient, with a commensurate willingness to abandon enrollment where insurance premiums cannot outrun medical costs. The contemporary product and pricing policies reflect a retreat by the insurance industry from previous efforts to transform the health care system and embody a delegation to individual consumers of responsibility for setting priorities and making financial tradeoffs.

Increased Copayments Portend Decreased Use of Chronic Medications

Higher copayments decrease a health plan's drug costs, but whether higher copayments affect all drug use equally is less clear. In this complex retrospective analysis of linked pharmacy-claims data and health-plan benefit designs, medication use was assessed in 528,969 beneficiaries (age range, 18-64) who had chronic conditions and who …

Capital Access—A Key to Survival

IN THIS ISSUE of Frontiers, the two feature articles discuss the capital imperative: hospitals' competitive positions and, indeed, survival are inextricably linked to their ability to access capital. Clearly, access to capital is highly dependent on an organization's credit rating and overall creditworthiness, which is a function of many factors such as market position, profitability, liquidity, and debt burden. Highly credited hospitals are able to raise affordable capital. More poorly performing hospitals have limited access to capital, must pay a premium, or both, forcing margins to further erode. The result is additional closures, further consolidations within the industry, and an inability by some institutions to keep up with technology advancements, thereby impeding patient safety and quality. THE CLIMATE FOR ACCESSING CAPITAL Generally favorable conditions have prevailed in the healthcare market in recent years, such as increased utilization, lower interest rates, strong managed care rate hikes, market basket increases from Medicare, and supplemental payments from the states for tobacco lawsuit settlements. In addition, hospitals have implemented aggressive cost-control programs and divested themselves of noncore operations. Despite this friendly climate, many hospitals are still vulnerable and have had a limited ability to access capital. A review of the summer 2004 rating outlooks from Standard & Poor's (S&P), Moody's Investors Service, and Fitch Ratings shows a growing polarization of have and have-not hospitals with respect to operating performance and credit quality. Downgrades continue to outpace upgrades. For the weaker hospitals, a negative outlook is forecasted. Contributing to this potential downturn are burgeoning federal and state budget deficits that will likely result in reimbursement reductions or a tightening up of Medicaid eligibility. Reductions in coverage or higher copayments are also a likely result of a push back from employers that are no longer willing to accept double-digit rate increases. Add to this a growing burden of bad debt and charity care, shortage in nursing and allied health personnel, and unfunded government mandates (e.g., staffing ratios and quality initiatives), and hospital operating margins will be further pressured. Furthermore, stock market uncertainty has affected investment earnings and increased contributions to self-insurance plans and defined benefit pension plans. At the same time, hospitals are under tremendous pressure to make capital investments in major information technology systems (e.g., computerized physician order entry, electronic health records), infrastructure to update aging physical plants and expand capacity (e.g., emergency departments, operating rooms, outpatient areas and beds), and new medical equipment (e.g., digital radiology systems). Moody's contends that capital spending will continue to rise as hospitals strive to maintain their competitive position, resulting in higher debt levels or lower liquidity levels, both of which stress balance sheets. Affirming the importance of reinvestment in property, plant, and equipment and strategic capital allocation, the rating agencies recently introduced new ratios by which to measure capital expenditures: capital expenditures as a percentage of earnings before interest, taxes, depreciation, and amortization and as a percentage of total revenue. The authors of both feature articles lay out solid strategies for coping with these challenges during this difficult time. PLANNING FOR CAPITAL SPENDING As suggested, a financial and/or capital plan is clearly an integral part or outcome of an overall strategic planning process, especially given the multiple, often conflicting, demands on capital resources. One cannot overemphasize the importance of focusing on core service lines and maintaining strong operating margins to support any planned increases in capital spending. …

Impact of Three-Tier Pharmacy Benefit Structures on Consumer Attitudes, Pharmacy, Medical Utilization and Costs

Three-tier pharmacy benefit plans are the dominant structure in prescription drug coverage today. In these plans three copayments exist. The lowest copayment is for generics, the middle copayment is for preferred brands and the highest copayment is for non-preferred brands. The premise of these plans is that by shifting the burden of cost onto the consumer, consumers will be more judicious in their prescription purchasing behavior. This review article outlines the empirical evidence regarding the utility of three-tier plans in changing consumer’s prescription purchasing behavior.

Guest editors' introduction: what can large pragmatic clinical trials do for public mental health care?

Persons in positions of responsibility often need to make important decisions with inadequate information. Those involved in public mental health care are no exception. Promising new treatments often come with high price tags, and decision makers must use whatever information they have to weigh benefits against costs. Of late, this tension has become more acute, threatening to reach crisis proportions. With the costs for health care once again rising at a rate that exceeds inflation and Federal and State governments facing budget shortfalls, increasing pressure is being placed on Medicare, Medicaid, the Veterans Health Administration, and private third party payers to limit expenditures (Abelson 2002; Freudenheim 2002; Pear 2002fc, 2002c). A growing number of people are uninsured, and the insured are expected to have fewer options and to face higher out-of-pocket expenditures (Strunk et al. 2001; Abelson 2002; Pear 2002a). The revolution in biomedical research technology and the burgeoning knowledge base that this has produced, in concert with the prospect of large profits, have accelerated the pharmaceutical industry's rate of drug development (Berndt 2001). Consequently, an increasing number of drugs are approved by the U.S. Food and Drug Administration (FDA) and introduced into clinical use each year (Berndt 2001). Antipsychotic drugs are a case in point. After the first antipsychotic drug chlorpromazine was introduced in the United States in 1953, 11 agents were approved by the FDA and made available for clinical use through 1989. Chlorpromazine was the prototype of a class of drugs that were initially termed neuroleptics but have since become known by a variety of names, including typical, conventional, or first generation antipsychotic drugs. In 1989, clozapine, considered the prototype of a second generation of antipsychotic drugs called atypical antipsychotic drugs, was approved by the FDA. In the 12 years prior to the introduction of clozapine, there were no new drugs approved as antipsychotics in the United States, while in the 12 years since clozapine, there have been six though only five are currently marketed for clinical use The newer drugs, still under patent protection, are priced many times higher than the older drugs, for which there are often generic versions. Because the new medications are promoted as having superior efficacy and/or safety, they are often used preferentially, thus increasing the costs of drug acquisition. Prescription drugs are the fastest-growing component of recent rises in health care costs (Levit et al. 2003). A result of this phenomenon is the proliferation of cost containment mechanisms—including preferred drug lists, treatment algorithms, prior approval procedures, and higher copayments— employed by third party payers (Bemdt 2001). Despite their justification on economic grounds, such measures create concerns and conflicts among various stakeholders. Consumers and advocates want unrestricted access to the best available treatments, and they want to make sure that consumers of mental health care are not unfairly targeted by cost control efforts. Pharmaceutical companies want to be able to sell their products at market-based prices that will enable them to return a profit to their shareholders and fund their research and development programs. Mental health care clinicians want to be able to use the best treatments for their patients, and mental health care administrators want to provide high-quality care in a cost-effective manner. How is one to effect a mental health care policy that satisfies all of these competing interests? If new treatments are indeed more effective, then the difference in their cost may be partially offset by reductions in the need for other services that patients receiving the treatments will require, as well as increased productivity. Indeed, this is the claim of the pharmaceutical companies and proponents of the new medications. However, the evidence for such claims comes largely from studies conducted as part of the phase HI and IV development of the medications, along with optimistic extrapolations of these results. Objective and dispassionate analyses of the existing data provide neither a clear

Consumer Preferences for Types of Cost Containment in Prescription Drug Programs

OBJECTIVE: To estimate (1) the relative importance of three major attributes of prescription drug benefit plans level of copayment, pharmacy access, and access to products that health plans use to control prescription drug expenditures and (2) the trade-offs that consumers make among these attributes. DESIGN: Self-administered survey and conjoint analysis of consumer preference data. PARTICIPANTS: A convenience sample of 130 consumers in Richmond, Va. MAIN OUTCOME MEASURES: Consumer preference ratings for 11 hypothetical drug benefit plans; relative importance consumers attributed to level of copayment, pharmacy access, and access to products in selecting drug benefit plans; trade-offs consumers made among these attributes. RESULTS: Product choice was the most important attribute in selecting a drug benefit plan. The importance rating was 42.1%. Consumers indicated strong preferences for open formularies. Level of copay received an importance rating of 31.9%. Higher copays were associated with lower consumer preference. Choice of pharmacy had an importance value of 26.0%. Consumers preferred plans that allowed either free choice of pharmacy or that included their current pharmacy. A market segmentation analysis yielded similar results. CONCLUSIONS: Conjoint analysis provides useful consumer preference and trade-off information that health plans could use to minimize consumer dissatisfaction with drug benefit plans.

Universality: a call for compassion

Acyclist is struck by a car and lands on the pavement, motionless. Paramedics arrive within minutes and determine that he has multiple fractures, a head injury and possible intra-abdominal trauma. Barely conscious, the victim whispers, “I have no insurance!” This poses a dilemma. The nearest hospital, St. Avarice, has an excellent reputation but high co-payment charges. Riffraff General is farther away and often has long waits, but the care is free. To complicate matters, St. Avarice is known to “dump” uninsured patients. The paramedics head for Riffraff, where the patient later dies of treatable injuries while waiting for an operating room. Farfetched? Hardly. Dumping, defined as “denial of or limitation of emergency care, and referral elsewhere, usually for financial reasons,” was, until recently, a widespread practice in the US. Economically motivated transfers led to significant unnecessary mortality, 1 and “dumped” patients were predominantly young, male, uninsured, minority members, therefore provoking the observation that dumping is a practice “which appears to reinforce racial and class inequities of access to medical care.” 2

Higher Co-Pays Forcing Some Patients to Stop Treatment

Higher Co-Pays Forcing Some Patients to Stop Treatment

An Examination of Employee Benefits Cost Control Strategies in New Jersey Local Governments

Employee benefits are an essential and costly component of the compensation and human resources management system. This research effort surveyed 118 New Jersey local governments on benefits cost management strategies. The results indicate that the majority of local governments are utilizing displacement strategies that shift or impose costs onto either taxpayers (higher taxes) or employees (outsourcing, higher co-payments) in contrast to structural solutions that address the macro-level financial variables that influence either the demand or supply side of benefits finance (i.e., self-insurance, benefit consortiums, or service regionalization). Only a quarter of the strategies employed entailed structural solutions. Recommendations are provided to enhance the effectiveness of benefits plan cost-control strategies, including systematic needs assessment and technical assistance.

Rising Drug Costs in US Health Care

In recent months, American health care has become obsessed with drugs. The cost of drugs has grown sharply and steadily and now threatens to outstrip hospital costs as a percentage of health care expenditure by the early part of the next century. The number of prescriptions has grown steadily, as have unit dosage costs. Rising drug costs threaten the American approach to delivering and paying for medical care. Almost all managed care insurance policies have paid for most prescription drugs with only a small copayment by patients. And most physicians have become accustomed to expecting patients to have low financial barriers to taking prescribed drugs. As overall health care costs begin to rise significantly (after five years of little increase), these conditions have begun to erode. Health plans have intervened in two major ways. First, they have altered the prescription drug insurance that they negotiate with purchasers. The 'three tiered' drug benefit is becoming more common. In this plan, a formulary makes an array of basic drugs available to patients for a small copayment; other generic or brand name drugs are available at a higher copayment (e.g. $15); and still other brand name drugs carry a much higher copayment amount (c.g. $25 per month's prescription). This is a cost-sharing, or cost-

Copayment and national health insurance in the United States: a critique of work by Newhouse, Phelps, and Schwartz.

In "Policy Options and the Impact of National Health Insurance," Newhouse, Phelps, and Schwartz concluded that any national health insurance program which did not provide for high user copayments, particularly for ambulatory services, would swamp, and ultimately wreck, the health care delivery system, particularly for ambulatory services. This paper presents a detailed critique of their work. Three major points of criticism are raised: First, Newhouse et al. have engaged in some questionable methodological practices. Second, they fall into a serious contradiction in gathering evidence to support their basic postulate. Third, they adopt a unidimensional view in proposing solutions to the problems which they predict will arise. From these criticisms, the conclusion is drawn that Newhouse et al. failed to prove their case.