A recent study run by the National Board of Economic Research (NBER) suggests that a relatively minor increase in drug costs – $10 per prescription – can lead to a 33% increase in mortality.
“As insurers place more emphasis on cost-sharing via deductibles, coinsurance and copayments, patients pay more out of pocket for health care,” the authors –Amitabh Chandra, Evan Flack and Ziad Obermeyer – noted. “This can induce more efficient care if patients can balance these costs against benefits.” But, as they found, this calculus isn’t easy for patients.
Zeroing in on how price increases on prescription drugs impact patient choice among Medicare recipients, they noted something called “behavioral hazard” – “patients responding to prices in ways that systematically deviate from the cost-benefit calculus.” They found that “patient cost-sharing introduces large and deadly distortions into the cost-benefit calculus”, explaining how “small increments in cost cause patients to cut back on drugs with large benefits, ultimately causing their death.” People were literally choosing to stop taking high-value drugs solely due to the price. The researchers wrote how the “cutbacks are widespread, but most striking are those seen in patients with the greatest treatable health risks, in whom they are likely to be particularly destructive.”
Cost-sharing, after all, is designed to encourage smarter consumer decision-making when it comes to shopping for health care. However, the NBER study adds to an increasing pile of evidence that hints it falls short of achieving that goal.
In one Kaiser Family Foundation survey, half of the respondents with insurance admitted to health care costs leading to a postponed doctor’s appointment or unfulfilled prescription. Los Angeles Times’ Noam Levey has documented that in a little over a decade, deductibles have quadrupled for American health care consumers, leaving people struggling to afford the added costs of co-pays and deductibles.
If, like the aforementioned research and studies suggest, patients are unable to make good value judgments, the economic argument for cost-sharing begins to fall apart.
“Understanding the range of health consequences of cost-sharing, and developing new policies to limit harms, is an urgent need,” the NBER researchers wrote. “The large mortality consequences of behavioral hazard are not currently factored into the design of cost-sharing–but should be. The extremely low life-year valuations we document can be seen as an opportunity for policy-makers to purchase large gains in health at extremely low cost, by investing in intelligent redesign of cost-sharing policies.” The researchers suggest one way to do this would be via a value-based insurance design where “proven treatments are given zero copayments, while treatment with ambiguous benefits are given high copayments.”
Perhaps a poor understanding of the mortality consequences of cost-sharing in the past makes the high mortality numbers reported in this study more surprising. “I never thought we would get a mortality effect of this size,” Chandra explained in a recent Vox article. “We never thought people would be cutting back on life-saving drugs to this degree.”
Not only do the findings in this study contribute to a growing literature documenting the consequences of plan choice, but it helps spark necessary conversation about evaluating the impact these policies have on patient health – not just on health costs.
