Cost sharing as a tool to drive higher-value care.

Economists like to say that there is no free lunch, but reducing wasteful health care spending in public programsmay be as close aswewill ever get. The challenge is that reducing such spending, or even identifying it, is hard. Some of the policy options focus on the health care provider side (eg, payment reforms), while others focus on the patient side, including greater cost sharing. The results reportedbySiddiqui et al1 in this issueof JAMA InternalMedicineunderscore thechallenges indeploying these cost-sharing tools. They found that introducing copayments for nonurgent emergency department (ED) visits for Medicaid beneficiaries had no effect on utilization. What does this resultmean for theuseof patient cost sharing as a tool todrive the health care system toward greater value? We begin by noting that this result is surprising. Decades of evidence have shown that higher out-of-pocket prices reduce the use of health care across a range of settings, including hospitals, office visits, and prescription drugs (as well as across care of differing health benefits).2,3 Other studies have found that copayments for ED visits result in lower utilization. For example, one study4 found that the impositionof copayments ranging from $20 to $100 led to a 10% to 25% decline in ED visits among privately insured individuals, with larger effects for lower-income enrollees, although the study didnot includeMedicaid beneficiaries. TheOregonHealth InsuranceExperiment found that gainingMedicaid coverage resulted in a 40% increase in ED visits by beneficiaries compared with their counterparts who remained uninsured and may have had to pay for ED visits out of pocket.5 It would be premature to extrapolate from the results of the study by Siddiqui et al1 to amore general conclusion that cost sharingdoes not affect utilization. However, the study reinforces the importantpoint thatnot all cost sharing is createdequal. For one thing, the level of cost sharing matters; this may help to explain why the results by Siddiqui et al1 differ from the earlier literature. The copayment amounts they study, ranging from $3 to $15, are lower than the copayments in previous studies (although theymay still represent a substantial fraction of disposable income for Medicaidbeneficiaries). Earlier studiesof cost sharing, including the RAND experiment2 and the article by Hsu et al4 found notonly that cost sharing reducedutilizationbut thatprogressively higher levels of cost sharing meant correspondingly larger reductions in utilization. The size of the financial incentivematters, but it is not the only thing that matters. Another important feature of effectivecost sharing is that itmustbeclearlycommunicatedtobeneficiaries. Ifpatientswereunawareof thecopaymentat theoutset or were unsure of whether the copayments would be imposed or actually collected in their circumstances (eg, whether a particular visit to the EDqualified as nonurgent), it would not be surprising that they did not respond by reducingvisits. Inshort, copaymentscanaffectpatientbehavioronly if patients know they exist. If cost sharing is to reduce utilization, then, it must be both big enough to matter and clearly communicated to beneficiaries. However, what if the goal is not simply to reduce utilization across the board but to shift patients from low-value to high-value care? Can patient cost sharing actually drive the system toward greater value? This is a much harder task for 2 reasons. First, beneficiaries must have adequate access to higher-value care, which is not necessarily the case for Medicaid beneficiaries seeking care outside of the ED.6 A second and more fundamental obstacle to using patient cost sharingas a tool to incentivizehigh-value care is that it may be difficult for patients to distinguish between highvalue and low-value care.7 Evidence on this point from the RANDexperiment2 is ambiguous.On theonehand, theRAND participants who faced higher cost sharing cut back on both low-value and high-value care, as judged by health care providers. On the other hand, care forgone by the group with higher cost sharing did not appear to have any adverse effects on health outcomes on average, at least over the 3-year to 5-year window of the experiment. If crude cost sharing affects both high-value and lowvalue care, cost sharing must be implemented in a more nuanced way. A better understanding of the challenges involved in the decisions that patients face suggests lining up cost sharing with the value of care. High-value treatments could bemade available with little or no cost sharing— and perhaps only for clearly defined subgroups of the population (eg, free statins for high-risk patients with diabetes mellitus)—while lower-value treatments could cost the patient more. In fact, the ED cost sharing in the policy studied by Siddiqui et al1 is implemented in this spirit (albeit imperfectly), with copayments for nonurgent visits for conditions that might be better treated in lower-cost settings but not for urgent visits requiring ED care. This kind of valuebased insurance design has demonstrated some success at improving the quality of care delivered, while holding total spending more or less constant. This is a success if the goal is increasing value and not simply spending less.8 However, most of the value-based insurance design successes to date have been for pharmaceuticals, where the implementation details are more tractable and benefits are well documented. Implementing the same principles more widely quickly introduces more challenging design questions, including how to (and who should) set copayments when the value of care varies widely across patients and how payment policies that vary across patients would affect insurance markets and risk pooling. Related article page 393 Effect of ED Copayments for Medicaid Beneficiaries Original Investigation Research