1. Providing Insights that Contribute to Better Health Policy Patient Cost Sharing: An Overview Joy M. Grossman, Ph.D. December 3, 2003

2. The New Cost Containment Frontier  Shift from provider to consumer cost controls  Levers include:  Increasing employee premium contribution  Reducing covered benefits  Increasing cost sharing at the point of service  Employers focusing on last option  Lowers employer and employee premium contributions  Shifts costs to employees who use services  Reduces total spending by making patients more price sensitive

3. Recent Changes in Cost Sharing  Increasing copays and deductibles  Replacing copays with coinsurance  Applying cost sharing to a broader array of services  Enhancing prescription drug tiering  Increasing out-of-pocket maximums  New products, e.g. consumer directed health plans, tiered networks

4. Effects of Increased Patient Cost Sharing  Reduces both employer and employee contributions to premiums by:  Shifting costs on to those who use care  Creating incentives to reduce use  Current mechanisms don’t differentiate between needed and discretionary care  Can create financial barriers to needed care especially for people who are low income or are chronically/seriously ill  Long term effects on health status unknown

5. Cost Sharing Innovations  Reduce spending by giving patients incentives to use appropriate care while mitigating barriers to needed care  Link cost sharing to patient’s choice when there are options  More effective services/treatment options  Participation in care management programs  Efficient providers  Limit cost sharing for:  Needed care  Patients who “do the right thing”

6. Design Issues  Is there adequate clinical and other research to inform design?  Are employers willing to pursue such approaches?  Will innovations be used for small employers?

7. Implementation Issues  Can patients be provided with adequate information to make appropriate decisions?  How would more complex cost sharing affect the physician’s clinical decision making process? Can physicians steer patients towards appropriate care?  Would these innovations interfere with other (mostly provider focused) quality improvement efforts?  Are such innovations too complex to administer?

8. Broader Issues  What are the limits to savings from cost sharing innovations?  Might there be a backlash from consumers or providers?  Who is liable for determinations of medical effectiveness?  Could risk selection be a significant problem?

9. Providing Insights that Contribute to Better Health Policy Sally Trude Presentation (click here) Sally Trude Presentation (click here)