Posted on September 16, 2002

Prof. Donald W. Light responds to Prof. Kevin Grumbach's comments on cost


Prof. Donald W. Light responds to Prof. Kevin Grumbach's comments on cost

Further Thoughts on "Cost Sharing"

American employers and policy makers are unique in their conviction that
cost sharing (by which I mean co-payments) will or do hold down rising
health care costs. As European experts note, the United States has had by
far the greatest amount of cost sharing for decades and by far the most
costly health care system with the poorest controls over its escalating
costs. For a realistic, evidence-based overview of the comparative
literature, I recommend Chapter 3 of European Health Care Reform: Analysis
of Current Strategies from WHO-Europe, Copenhagen 1997.

One basic reason co-pays have little effect, as Berk and Monheit have noted
in Health Affairs, is that patient-based decisions largely consist of
initial decisions to see a doctor or not and other similar decisions that
affect only a few percent of total costs. If one has a co-pay on more
serious and costly decisions, like hospitalization, it's a punishment, not a

When Congress decided that senior citizens should pay for the first day of
hospitalization, what did they have in mind? -That patients whose doctors
think their problem is serious enough to be hospitalized should be
encouraged to refuse because of the cost? Or go hospital shopping? Or
generate income for Medicare? No other advanced system considers co-pays as
a serious tool for cost containment or income, and most consider them
clinically perverse as well as unethical. Several have used them and then
dropped them because of their administrative costs, nuisance and perverse
effects on patients and staff. No evidence exists that co-pays lower the
rate of increasing costs - they just make the sick pay some of them.

The European overview addresses a number of other forms of cost sharing,
such as benefit limits, and in a recent Health Affairs article (Web
2002:W229), Lee and Tollen address both, but with a very different tone.
Lee and Tollen write about excluding drug benefits, or prevention services,
or high-cost cases with the same neutrality that they might write about how
employers could save on company cars by not having air conditioning or
remote access systems or anti-lock brakes. You can cover the prescription
drugs that board-certified physicians think sick patients need for their
illness or not. It's treated as morally neutral as deciding whether you
want to pay for AC or remote access on a car or not.

The myth of co-pays as an effective tool is perpetuated by econometric
models like the Hay model used by Lee and Tollen, that builds in assumed
savings; so that it "proves" by definition that any co-pay policy saves
money. "Cost-sharing" is also a highly political and moral term, with its
share-the-burden connotation. Who can be against sharing, or choice or
empowerment? These American policy themes make in nearly impossible for
policy makers to be realistic about the bad choices, disempowerment and
impoverishment that many "cost-sharing" policies impose, such as limiting
coverage for needed services and imposing high co-pays. Have they read in
Tom Rice's seminal book about the realities of consumer choice in health

Suppose we call co-pays, Making the Sick Pay? Then it is clearer what is
going on, that the policy goal is to provide disincentives to patients to
not follow what their doctor recommends. I.e. we spend great sums training
doctors well and acknowledge that they are masters of diagnosis and
treatment with licenses to do both, but then punish patients financially for
following doctor's orders.

At the end of their article, Lee and Tollen mention that just as much can be
saved by having a group-model HMO in which health care teams can hold costs
down by providing evidence-based integrated care within a system that
minimizes duplications, waste and overhead; so there's a third choice beside
not covering needed services or making the sick pay for being treated.

In the rest of the world, this third option stands for the main event.
Costs are contained effectively and over time through supply-side measures
and through organizing the delivery system well. You can't do this without
some form of universal health care, however. Costs cannot be contained
without getting your arms around the whole system. Otherwise you get what
European experts observe has been happening in America for years, one
partial initiative after another that leads to providers shifting costs to
some other part of the system. Cost-sharing in patchwork system, together
with consumer "choice" and "empowerment" will lead to new cost shifting and
poorer care for those who need it most.

Donald W. Light, Ph.D., Professor of Comparative Health Care Systems, UMDNJ
and Fellow, Center for Bioethics at Penn