Archive for June 8th, 2011
WC is undertaking an intermittent series on Medicare, and specifically on claims about Medicare that are simply untrue. WC earlier examined the claim that increasing the co-payment obligation – making seniors pay more – will save money, and the claim that privatization will save money. Now WC will examine the claim that making patients have “skin in the game” will save Medicare money.
“Skin in the game” is the inelegant Republican phrase for sharing of medical expenses, the cost of Medicare, between the government and the patient. It’s inappropriately lifted from Warren Buffet, who approves of highly aid executives investing their own money in the companies they are running. The metaphor isn’t a good fit for the Medicare situation. The idea there is that if the patient is paying a chunk of the medical bills in the form of co-payment and deductibles, the patient is less likely to run to the doctor and spend Medicare money over silly little things.
The most famous research on patient cost-sharing is the RAND Health Insurance Experiment, which was conducted with 2,750 families from 1971 to 1982. Each family was randomly assigned to one of five formulas determining how much of their medical expenses they would pay themselves.
The RAND results showed that the introduction of cost-sharing can reduce medical spending without causing harm to health. That’s the holy grail of health policy. The biggest reductions in the RAND study, though, came in moving from zero expense for families to at least some cost-sharing. As we already have some cost-sharing in our current system (co-pays and deductibles), that finding doesn’t suggest a new path to savings. And, unfortunately, the results from raising cost-sharing above current levels were generally more modest. In fact, economic incentives by themselves do not improve appropriateness of care or lead to clinically sensible reductions in service use. That presents the risk that patients faced with higher costs will avoid or defer necessary medical care, delaying inexpensive problems until they are expensive crises. Set aside quality of life issues; the studies show that higher co-payments makes overall health care more expensive.
Nor does “skin in the game” make patients take better care of themselves, by avoiding risk factors for chronic health oconditions. The RAND experiment examined whether shouldering more of their own health care costs leads people to take better care of themselves. It did not. Risky behaviors were not affected — rates of smoking and obesity, for instance, did not change.
But the fundamental problem of increasing co-payment obligations is that it doesn’t address the real problem facing Medicare and Medicaid: treatment costs are increasing much faster than basic inflation. Co-payment does nothing to address that fundamental problem.
So “skin in the game” is another mythical cost containment device after it moves above 10-25%, which is where it is under present law. At higher levels, the higher patient out of pocket costs cause patients, and especially the poor, to avoid or defer necessary and appropriate care, resulting in higher total expenses in the long run. And all the while the real problem of containing the increases in costs of treatment, inflation in the costs of the same procedure, goes unchecked.