High cost sharing for low-value services may increase overall health care spending

Impact of Increased Cost Sharing on Utilization of Low Value Services

By Jonathan Gruber; Catherine Maclean; Kevin G. Volpp; Bill Wright; Eric Wilkinson
American Society of Health Economics Sixth Biennial Conference, June 13, 2016

Given rising healthcare costs in the United States and the relatively poor health of Americans, research on cost-effective benefit designs that do not impede patient outcomes is critical.  Value-based insurance design (VBID) programs hold great promise as they align patient out-of-pocket spending with service value, and can thereby direct health dollars away from wasteful services, and improve patient outcomes through better alignment of treatment and patient need.
The existent VBID literature focuses primarily on reducing patient cost sharing for high value care and has tended to be limited to medications.  There is scant information on the effectiveness of raising patient cost sharing for low value care (e.g., unnecessary imaging services).  Moreover, insight from behavioral economics suggests that the latter benefit design may be more effective in changing behavior as it penalizes those patients using services of low value.  Better evidence on VBID programs is needed, given that such programs are embedded in the Patient Protection and Affordable Care Act and numerous employers across the U.S. are implementing such programs.
In this study we evaluated two innovative VBID programs implemented by public employers in the state of Oregon between 2010 and 2012.  The VBID programs we evaluated increased cost-sharing for low value healthcare services.  Specifically, patient co-payments were increased by $100 to $500, representing a much more substantial rise in out-of-pocket spending than has typically been evaluated in the past.  Targeted services included a number of services believed to offer limited benefits to patients (for example, inpatient sleep studies, upper GI endoscopies that are not viewed as medically necessary, and over-used imaging services and surgeries), and emergency room episodes.
To examine the effect of these VBID programs we estimate differences-in-differences (DD) models coupled with administrative claims data spanning 2009-2013 on approximately 300,000 public sector employees and their dependents.  Specially, we exploit programmatic changes that occurred across time, organization, and service, leveraging a quasi-experimental design to estimate the impact of the VBID programs.  To further strengthen our design, we utilize comparable data from three public employers in Oregon that did not implement a VBID program over the same time period as a comparison group.  Our outcomes include healthcare utilization (both on the extensive and intensive margins), healthcare costs, and patient well-being.  We also examine heterogeneity in treatment effects by patient characteristics.

Our findings suggest that increasing cost-sharing for low value healthcare services reduces utilization of some, but not all, targeted services.  However, we find that increased cost-sharing may lead to modest increases in overall healthcare spending.  Finally, we identify heterogeneity by patient characteristics.  These findings suggest that although VBID programs may steer patients away from targeted low value services, these programs may not lead to substantial reductions in healthcare spending overall, at least in the short run.  Future studies should examine longer term impacts of VBID programs and different types of VBID program designs on utilization and costs.



By Don McCanne, M.D.

It seems intuitive that value-based insurance design (VBID), such as requiring much higher patient cost sharing for low-value care (e.g., much greater out-of-pocket payments for “unnecessary” CT or MRI scans), should help reduce our total health care spending without inducing a major negative impact on health outcomes. But the authors of this study find that “increased cost-sharing may lead to modest increases in overall healthcare spending,” even though it may reduce utilization of some, but not all, targeted services.

Thus it appears that VBID may not be a very effective tool for reducing overall health care spending. Besides, philosophically it does not seem right that patients must face a financial penalty for obtaining the care that their health care professionals have recommended.

If penalties were to be assigned for using low-value care, wouldn’t it be more appropriate to apply them to the health care provider who would profit by selling more health care services with very limited value? But then how would you determine the threshold of what care is of value and what isn't? Regardless, this report seems to provide an argument for dispensing with penalties in health care.

Maybe since we haven’t had much luck with carrots and sticks, we should give up on relying on intuition in implementing health care reform and instead adopt a proven model that is highly effective in improving affordability and access to health care for all - a single payer national health program: Improved Medicare for All.