Cost sharing blocks access to health care

The notion that health cost containment requires people to put “skin in the game” has a long pedigree. Requiring people to pay something through premiums or co-pays for health care, the theory goes makes them more discerning consumers about health services and eliminates unnecessary health care.

The problem is that they also stop  seeking care for things that require medical attention.

A recent meta study in Pediatrics has reviewed the existing research on the impacts that cost-sharing through charging low-income people premiums for Medicaid and CHIP.  Reviewing eight studies on the subject noted that all of them found that low-income recipients of Medicaid were more likely to cut out needed care than they would with no costs. Aaron Carroll of the must-read Incidental Economist blog breaks it all down succinctly and clearly here. 

That study joins an National Bureau of Economic Research study from 2015 that showed employees insured under plans with high cost-sharing simply stopped seeking care rather than shopping around.

This outcome was actually pretty predictable.  In the 1970s, the famous RAND healthcare study ran across similar findings as well.  The result that always gets reported from that study is that people tend to consume more healthcare if they don’t pay for it, without regard to quality. Conversely cost-sharing in the form of co-pays, deductibles and coinsurance, decreased the amount of healthcare consumed.

What isn’t often reported, however, as Balloon-Juice’s resident Health Policy Richard Mayhew has noted, is that people subjected to cost-sharing in the RAND study (and follow-up studies) consumed less health-care regardless of quality. That is, they didn’t become more discerning consumers that the “skin in the game" argument suggested they would be. Instead they cut back on needed care, likely with bad results for their own health, and public health.

The Pediatrics meta study shows that a reasonably large body of research since then on the same subject reaches the same conclusion – charging poor people for health care leads them to skip necessary care.

But many state Medicaid programs incorporate cost-sharing for enrollees in the higher end (above 100 percent) of the Poverty line, and Indiana’s expansion waiver makes everyone in its “Healthy Indiana” contribute something to a Health Savings Account on a monthly basis. To be clear here, these are generally low amounts -- $1 for co-pays or $5 a month into an Health Savings Account. Most people in the program pay them, but some still can’t, which makes the program controversial and less helpful than it otherwise would be, while contributing miniscule amounts to its bottom line.

The research implies that focusing on the supply-side (providers) is ultimately the most effective way to control costs. On some level this is intuitive. Only non-individual payers (like the government and, yes, even those evil insurance companies) have the expertise and financial power to uncover and force providers to provide cost-effective care. Reforms to payments like penalties for unnecessary hospital readmissions, cutting payments for Medicare Advantage programs, encouraging accountable care organizations and the still dormant Payment Advisory Board, ultimately will help providers push their expertise toward providing better care instead of more care.

So if cost-sharing doesn’t work, why does it keep finding its way into Medicaid expansion programs?

To put it bluntly: conservative ideology in the case of Republicans controlling numerous state governments, and the need to work around it on the part of the Obama administration and allies pushing to expand Medicaid.

The Obama administration’s basic strategy seems to use cost sharing as a bargaining chip in Medicaid expansion negotiations with GOP-controlled states. The administration willing to a give a bit on cost sharing in exchange for the goal of extending basic coverage to large swaths of previously uninsured individuals. Given the practical constraints of resistance in GOP-controlled states, it seems like a reasonable approach. It will allow states to expand Medicaid with a bit symbolic (though harmful) cost-sharing in a waiver. Even though the take-up would be lower than it would be with a no-premium no-cost-sharing structure, the compromise is worth it to get large numbers of people into a Medicaid expansion instead of holding out for a completely free Medicaid program while tens or hundreds of thousands of people twist in the wind. Indiana, Michigan, Iowa and Arkansas’s original waiver expansions fall under this rubric of expansion in return for a bit of cost sharing – especially Indiana’s plan which mandates contributions even from extremely poor people under 50 percent of the poverty line.

However, Obama’s HHS has drawn three fairly bright lines. First, it almost always rejects egregious cost sharing for the most vulnerable beneficiaries: extremely poor individuals (under 50 percent of the poverty line and medically frail recipients. Second, it rejects work requirements for Medicaid recipients out of hand.
Finally, Secretary Sylvia Burwell has strongly resisted attempts to introduce or increase cost-sharing for people enrolled in an expansion program already up and running. So Ohio, which wants to attach cost-sharing to its Medicaid expansion population and Kentucky Governor Matt Bevin, who wants to trade in the successful traditional expansion of Democratic Governor Steve Beshear for an Indiana-style model, will likely face stiff resistance from HHS as long as a Democrat occupies the White House.

Assuming a hypothetical Republican administration keeps the basic structure of Obamacare intact (still an extremely large assumption, though less big than it was in 2012), you can bet that President Cruz’s HHS secretary would eagerly approve lots more cost-sharing for poor people in the name of “personal responsibility,” regardless of the impact on access to care or overall health.

Yep, elections still matter.