Rand Corporation via Kaiser Family Foundation, October 2006, The Role of Consumer Copayments for Health Care: Lessons from the RAND Health Insurance Experiment and Beyond

When copayments for ambulatory care are increased, elderly patients may forgo important outpatient care, leading to increased use of hospital care and costs according to a study published in The New England Journal of Medicine.

The study followed 899,060 beneficiaries enrolled in 36 Medicare plans during the period from 2001 through 2006. In plans that increased copayments for ambulatory care, mean copayments nearly doubled for both primary care ($7.38 to $14.38) and specialty care ($12.66 to $22.05). In control plans, mean copayments for primary care and specialty care remained unchanged at $8.33 and $11.38, respectively.

Study findings• In the year after the rise in copayments, plans that increased cost sharing hado 19.8 fewer annual outpatient visits per 100 enrollees,o 2.2 additional annual hospital admissions per 100 enrollees,o 13.4 more annual inpatient days per 100 enrollees, ando an increase of 0.7% in the proportion of enrollees who were hospitalized as compared with concurrent trends in control plans.

Assuming an average reimbursement of $60 for an outpatient visit, seven annual outpatient visits per enrollee, and an average copayment increase of $8.50 per visit,o the plan would save $7,150 per 100 enrollees (Medicare plan would receive an additional $5,950 in patient copayments and avert $1,200 in spending on outpatient visits for every 100 enrollees).o However, inpatient care will increase by $24,000 for every 100 health plan enrollees (assuming an average cost of $11,065 for hospitalization of a person 65 to 84 years of age in 2006).

Even if we used the upper bound of the 95% confidence interval for the estimate of outpatient visits, used the lower bound of the 95% confidence interval for the estimate of inpatient admissions, and doubled the average reimbursement for an outpatient visit, additional expenditures for hospital care would still exceed any savings from the copayment increase by a factor of nearly two.

• The effects of increases in copayments for ambulatory care were magnified among enrollees living in areas of lower income and education and among enrollees who had hypertension, diabetes, or a history of myocardial infarction.

The New Journal of Medicine (NEJM) cited RAND Co-Pay Study published in October 2006 which acknowledged a clear tradeoff as patient co-insurance amounts rise. On the one hand, co-insurance can induce patients to use care more efficiently. With no co-insurance costs, patients have no financial disincentive to forgo care, even if it is of dubious value.The RAND study called, The Role of Consumer Copayments for Health Care: Lessons from the RAND Health Insurance Experiment and Beyond, concluded that cost-sharing with employee does not harm the health for the average person.