CASE STUDY 1: THE PROBLEM OF HIGH DEDUCTIBLES AND CONSUMER DIRECTED HEALTH CARE IN U.S. HEALTH INSURANCE

2/11/2021 New research shows higher health insurance costs leads to more deaths - Vox

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A new study finds that higher copays for prescription drugs leads to patients cutting back on medications and, eventually, higher mortality rates.

The economic argument for eliminating out-of-pocket costs, in one new study. By Dylan Scott @dylanlscott [email protected] Feb 10, 2021, 4:10pm EST

Charging patients just $10 more for medications leads to more deaths

| Brendan Smialowski/AFP via Getty Images

It turns out $10 can be a matter of life and death, according to a new study on how

patients respond to higher health care costs.

Researchers at Harvard University and the University of California Berkeley examined what

happened when Medicare beneficiaries faced an increase in their out-of-pocket costs for

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2/11/2021 New research shows higher health insurance costs leads to more deaths - Vox

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prescription drugs. They found that a 34 percent increase (a $10.40 increase per drug) led

to a significant decrease in patients filling their prescriptions — and, eventually, a 33

percent increase in mortality.

The rise in deaths resulted from people indiscriminately cutting back on medications when

they had to pay more for them, including drugs for heart disease, hypertension, asthma,

and diabetes.

“We find that small increases in cost cause patients to cut back on drugs with large

benefits, ultimately causing their death,” the authors — Amitabh Chandra, Evan Flack, and

Ziad Obermeyer — wrote. “Cutbacks are widespread, but most striking are those seen in

patients with the greatest treatable health risks, in whom they are likely to be particularly

destructive.”

It is difficult to come up with a study design that directly measures the effect of health

insurance on health outcomes. These researchers overcame that problem by tracking the

prescription benefits for people newly enrolling in Medicare when they turn 65. People with

birthdays earlier in the year would be more likely to face higher out-of-pocket costs than

people with birthdays later in the year, given the way Medicare’s benefits are designed. By

comparing the data between the different age groups, using as a baseline an estimate of

how much the patients would have been expected to spend without any cost-sharing, the

researchers were able to isolate the effect of cost-sharing on the use of prescription drugs

and mortality rates for patients.

This finding challenges an important assumption embedded in American health care policy.

In the 1970s and ’80s, the RAND Health Insurance Experiment concluded that small

copays encouraged patients to use fewer health care services without leading to worse

health outcomes. That helped establish a new economic argument for insurers to ask their

customers to put more “skin in the game”: it would encourage more efficient use of health

care services with no downside.

But that premise presumed people would be rational. For example, if they are being asked

to pay more money for prescription drugs, they would cut back on less-valuable

medications first. The Harvard/Cal study didn’t detect any such rationality. When costs

went up, people just stopped filling their prescriptions for statins — high-value drugs that

are effective in preventing heart attacks.

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The researchers explained it like this: The way patients behaved when faced with higher

out-of-pocket costs would suggest that they placed very little value on their lives. They

literally stopped taking high-value drugs because of the price.

“I never thought we would get a mortality effect of this size,” Chandra told me. “We never

thought people would be cutting back on life-saving drugs to this degree.”

If patients can’t make good value judgments, the economic argument for cost-sharing

starts to crumble, and it starts to seem like eliminating cost-sharing — increasing the

likelihood patients will continue to take the medications they need to stay alive — would be

a cheap way to “buy” people more health. As the researchers wrote, “improving the design

of prescription drug insurance offers policy makers the opportunity to purchase large gains

in health at extremely low cost per life-year.”

Bernie Sanders’s Medicare-for-all single-payer plan eliminated cost-sharing. That’s one

way to do it. Chandra said that, alternatively, the government could create new regulations

to put a limit on cost-sharing for the large employer plans that cover most working

Americans. He said Medicaid is really the model; the 70 million poor Americans enrolled in

the program generally have no out-of-pocket obligations.

Eliminating out-of-pocket costs would come with a price: Insurers would likely charge

higher premiums to offset the loss of the copays and coinsurance that currently reduce

their direct costs. But if the goal is better health outcomes, that is arguably a price worth

paying.

“If we care about the sick more than the healthy, then we should be willing to raise

premiums to reduce cost-sharing,” Chandra said. “I think a lot of American health care is

catastrophic coverage to the healthy, which is fine. That’s valuable. But it’s not as valuable

as first-dollar coverage for the sick.”

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