1 Cost-Sharing: Effects on Spending and Outcomes Briefing by Katherine Swartz, PhD Harvard School of Public Health February 3, 2011

Agenda Why a review now? Methodology overview Guiding questions Principal conclusions Implications 2

Why a Review Now? No comprehensive study of cost-sharing since the RAND HIE Significant changes in health insurance and medical care since HIE Health care spending > 20% federal budget and growing faster than GDP  need to slow spending Patient cost-sharing a policy-tool? 3

Methodology Overview Evaluations of natural experiments preferred Problems with analyses using cross- sectional data Measuring responsiveness to cost-sharing – need for clarity 4

Questions Guiding Synthesis Effects on distribution of spending and total spending? Effects on health outcomes? Do responses differ by SES and health status? Effect on different types of services? Effects on use of prescription drugs? 5

Distribution of Health Care Spending, Source: Adapted from Kaiser Family Foundation Note: Dollar amounts shown are the annual expenses per person in each percentile

Effects on Distribution of Spending and Total Spending Not clear how distribution would be affected Reductions likely to come from healthy half of population – increasing share of spending by top 10% Unlikely to significantly slow total spending given advances in medicine 7

Effects on Health Outcomes No study since HIE on effects on health of general population –> long-term effects not known Few studies have had good control groups or good measures of health outcomes Increased cost-sharing for Rx for elderly and poor  increased hospitalizations, deaths, spending 8

How Do Responses Vary by SES and Health Status? Poor people disproportionately affected Poor people shift types of services used, which may increase total expenditures Not known if race & ethnicity affect responses when income is controlled People in poor health respond differently 9

Effects on Use of Different Services Preventive services: reduction Emergency departments: reduction, but no adverse health outcomes Mental health & substance abuse treatment: use very sensitive to cost- sharing 10

Effects on Use of and Spending on Prescription Drugs, 1 Decline in use and spending Mixed evidence: switch to less expensive, close drug substitutes? Greater reduction for non-essential drugs and drugs for asymptomatic conditions than essential drugs 11

Effects on Use of and Spending on Prescription Drugs, 2 Chronically ill reduced drug use but then had increased use of more expensive care Long-term effects of reduced use of essential drugs (esp. chronic) not known Medicare Part D plans: increased use of drugs, lower OOP expenses; but drop in use when expenses reach doughnut hole 12

Overall Conclusions, 1 We do not know if cost-sharing would reduce growth in total health care spending Disproportionately shifts financial risk to very sick Affects people differently depending on their income and health status 13

Overall Conclusions, 2 Most people do not distinguish between essential and non-essential health care services or prescription drugs Low-income people at greater risk for poor health outcomes due to increased cost- sharing 14

Policy Implications, 1 Not necessarily an effective policy tool for slowing health care spending Caution needed re: low-income people, chronically ill people Annual max on OOP spending tied to family income could limit financial risk 15

Policy Implications, 2 Increased cost-sharing for people with chronic conditions could result in higher spending, especially for Medicare Better targeting at less beneficial or non- essential services would improve efficiency and perhaps health outcomes 16

17 Project Information Web site: Contacts RWJF: Brian Quinn Synthesis Project: Sarah Goodell