• Center on Health Equity and Access
  • Clinical
  • Health Care Cost
  • Health Care Delivery
  • Insurance
  • Policy
  • Technology
  • Value-Based Care

Utilization Outcomes and Patient Cost Sharing

The American Journal of Managed CareSeptember 2008
Volume 14
Issue 9

To the Editor:The conclusions of Chernew and Newhouse’s commentary on the effects of cost sharing (July 2008)1 were based on an inaccurate presentation of currently available research evidence.

First, the commentary omitted all but one published controlled study of the effects of prescription drug cost-sharing increases in commercially insured populations. Studies employing quasi-experimental (pre-post or longitudinal with adequate comparison group) designs to assess typical copayment increases (≤$10, more in some studies) have consistently documented positive outcomes in commercially insured populations, including: (1) modest changes in prescription utilization overall2-6; (2) little or no impact on chronic medication adherence2,4-7; (3) increased use of lower-cost products eg, generics, preferred brands) in some but not all analyses2-4,8,9; (4) no impact on use of medical services, including emergency department visits, office visits, or inpatient hospitalizations5,6; and (5) net reductions in payer outlays for prescription drugs.2-6

Second and related, the commentary relied on inadequate and/or inapplicable research, including work that (1) was limited to low-income or special populations whose outcomes are not generalizable to commercially insured groups; (2) assessed extreme and atypical copayment changes of >$20; and/or (3) employed cross-sectional or simple pre-post research designs, which are insufficient to establish causality and known frequently to produce invalid results.3,10-12 The recent review by Lu et al of prescription drug use intervention studies that met “minimum criteria for methodological adequacy” (publication dates July 2001 through January 2007) included only one of the studies cited in the commentary by Chernew and Newhouse, a 2003 analysis by Huskamp et al.2,11

Because the study by Huskamp et al was the only adequately controlled analysis of a commercially insured population discussed in the commentary, the third error—an inaccurate description of that study’s results—is important. Pharmacotherapy discontinuation rates in the study by Huskamp and colleagues were not higher for patients experiencing a change of “about $10 to $20 per prescription,” as the commentary reported.1 The analysis described was limited to patients who used nonpreferred brand (NPB) drugs prior to the copayment change.2 Since the benefit design for the employer in that analysis changed from a single-tier copayment ($7) to a 3-tier copayment ($8/$15/$30), the actual copayment change was $23. A $23 copayment change is not only higher than the $10 to $20 range described in the commentary; it is also atypical, at more than 4 times the mean NPB copayment increase reported for any year from 2001 to 2006 for covered employees in the United States.13

Additionally, a second employer studied by Huskamp et al, whose results were omitted from the commentary’s discussion, did change its NPB copayment by $12 (from $6/$12 to $6/$12/$24). For that employer, Huskamp et al found that discontinuation rates were not significantly affected by the copayment increase. There was one exception—among users of NPB angiotensin-converting enzyme inhibitors, discontinuation rates were significantly higher for the comparison ($6/$12) group than for the intervention ($6/$12/$24) group (15.8% vs 8.3%; P = .03).2

Fourth, the commentary omitted relevant research evidence that was contrary to the conclusions presented by Chernew and Newhouse. In discussing the effects of costsharing reductions, the commentary omitted the finding by Karter et al (2007) that providing free glucose-testing strips to diabetic patients in one managed care organization “shifted costs from patient to health plan, without improving adherence” in blood glucose monitoring.14 The commentary cited a 2008 study suggesting that copayment reductions of “about $10 increased patient adherence to treatment regimens for chronic disease,”1,15 but did not discuss the study’s effect size—a clinically insignificant 7 to 14 days of additional pharmacotherapy annually.16 The finding by Wharam et al that enrollees in high-deductible health plans distinguish between essential (high-severity) and nonessential (low-severity) use of the emergency department17 was also omitted.

Given the evidence from adequately controlled research conducted since publication of the RAND Health Insurance Experiment (HIE), and the HIE’s finding of “minimal or no adverse health consequences associated with higher cost sharing,” 18 empirical support for the commentary’s conclusions is limited at best. Additional controlled research in this topic area is needed, but presentation of accurate information about the currently available data is crucial.

Kathleen A. Fairman, MA

Associate Editor and Senior Methodology Reviewer

Journal of Managed Care Pharmacy

Phoenix, AZ

Funding: None reported.

Author Disclosure: The author reports no relationship or financial interest with any entity that would pose a conflict of interest with the subject matter of this article.

Address correspondence to: Kathleen A. Fairman, MA, PO Box 31278, Phoenix, AZ 85046-1278. E-mail: kathleenfairman@qwest.net.


1. Chernew ME, Newhouse JP. What does the RAND Health Insurance Experiment tell us about the impact of patient cost sharing on health outcomes? Am J Manag Care. 2008;14(7):412-414.

2. Huskamp HA, Deverka PA, Epstein AM, Epstein RS, McGuigan KA, Frank RG. The effect of incentive-based formularies on prescriptiondrug utilization and spending. N Engl J Med. 2003;349(23):2224-2232.

3. Landon BE, Rosenthal MB, Normand ST, et al. Incentive formularies and changes in prescription drug spending. Am J Manag Care. 2007;13(6 pt 2):360-369.

4. Motheral BR, Henderson R. The effect of a copay increase on pharmaceutical utilization, expenditures, and treatment continuation. Am J Manag Care. 1999;5(11):1383-1394.

5. Motheral B, Fairman KA. Effect of a three-tier prescription copay on pharmaceutical and other medical utilization. Med Care. 2001;39(12):1293-1304.

6. Fairman KA, Motheral BR, Henderson RR. Retrospective, long-term follow-up study of the effect of a three-tier prescription drug copayment system on pharmaceutical and other medical utilization and costs. Clin Ther. 2003;25(12):3147-3161.

7. Roblin DW, Platt R, Goodman MJ, et al. Effect of increased costsharing on oral hypoglycemic use in five managed care organizations: how much is too much? Med Care. 2005;43(10):951-959.

8. Nair KV, Wolfe P, Valuck RJ, McCollum MM, Ganther JM, Lewis SJ. Effects of a 3-tier pharmacy benefit design on the prescription purchasing behavior of individuals with chronic disease. J Manag Care Pharm. 2003;9(2):123-133. http://www.amcp.org/data/jmcp/Research-123-133.pdf. Accessed July 19, 2008.

9. Rector TS, Finch MD, Danzon PM, Pauly MV, Manda BS. Effect of tiered prescription copayments on the use of preferred brand medications. Med Care. 2003;41(3):398-406.

10. Fairman KA. The future of prescription drug cost-sharing: real progress or dropped opportunity? J Manag Care Pharm. 2008;14(1):78-82. http://www.amcp.org/data/jmcp/JMCPMaga_JanFeb%2008_070-082.pdf. Accessed July 19, 2008.11. Lu CY, Ross-Degnan D, Soumerai SB, Pearson SA. Interventions designed to improve the quality and efficiency of medication use in managed care: a critical review of the literature—2001-2007. BMC Health Serv Res. 2008;8:75. http://www.pubmedcentral.nih.gov/articlerender.fcgi?tool=pubmed&pubmedid=18394200. Accessed July 19, 2008.

12. Cook TD, Campbell DT. Quasi-Experimentation: Design and Analysis Issues for Field Settings. Boston, MA: Houghton Mifflin Company; 1979.

13. Kaiser Family Foundation. Prescription drug trends fact sheet: May 2007. www.kff.org/rxdrugs/3057.cfm. Accessed July 17, 2008.

14. Karter AJ, Parker MM, Moffet HH, et al. Effect of cost-sharing changes on self-monitoring of blood glucose. Am J Manag Care. 2007;13(7):408-416.

15. Chernew ME, Shah MR, Wegh A, et al. Impact of decreasing copayments on medication adherence within a disease management environment. Health Aff. 2008;27(1):103-112.

16. Fairman KA, Curtiss FR. Making the world safe for evidence-based policy: let’s slay the biases in research on value-based insurance design. J Manag Care Pharm. 2008;14(2):198-204. http://www.amcp.org/data/jmcp/JMCPMaga_March%2008_198-204.pdf. Accessed July 19, 2008.

17. Wharam JF, Landon BE, Galbraith AA, Kleinman KP, Soumerai SB, Ross-Degnan D. Emergency department use and subsequent hospitalizations among members of a high-deductible health plan. JAMA. 2007;297(10):1093-1102.

18. Manning WG, Newhouse JP, Duan N, Keeler EB, Liebowitz A, Marquis MS. Health insurance and the demand for medical care: evidence from a randomized experiment. Am Econ Rev. 1987;77(3):251-277.

In reply:

As our commentary in the July issue of the Journal suggested, we consider assessing the impact of rising patient cost sharing on utilization and health to be an important topic for both managers and policy makers.1 In response to our commentary, Kathleen Fairman has taken issue with some of the facts as we reported them, and given the interest of open discussion, we have decided to publish her letter in this issue. Although our commentary was not intended to be a formal literature review, it is clear we have a fundamental disagreement with Ms Fairman about the interpretation of the literature.

In our opinion, there are 3 salient issues. First, to what extent do individuals respond to cost sharing? We believe the RAND Health Insurance Experiment (HIE) provides the gold standard answer to this question, suggesting a demand elasticity of about -0.2. Because elasticities for prescription drugs are particularly salient today, and because Ms Fairman’s letter focuses on them, it is worth noting that the RAND HIE reports a similar elasticity for prescription drugs,2 although that estimate does not hold cost sharing for other services constant. Two recent literature reviews we cited report elasticities for prescription drugs in the range of —0.1 to – We thank Ms Fairman for bringing a third literature review to our attention, which supports our position that utilization of prescription drugs responds to patient copays.5 While it is true that not all studies demonstrate a response to copays, and in fact, in some settings unobserved factors may mitigate the response, we believe the bulk of the evidence suggests higher copays cause utilization to fall.

Ms Fairman would have us believe that there is a response only after a certain threshold of cost sharing is reached. We agree that the response to large increases in cost sharing will be greater than the response to small increases in cost sharing. Moreover, perhaps the effect of copays is not linear. However, plausibility suggests a continuous response to copays, without discrete thresholds. For example, imagine the “threshold” for a utilization response was a $20 copay increase. It seems unlikely that an increase of $19.50 would have no effect but an increase of $20.50 would have the effects reported in the literature (and if there is a response to a $19.50 copay increase, why not a response to a $19.00 increase, etc). We believe it is more likely that the effects of smaller copay increases are smaller and more difficult to detect. In any case, empirical evidence exists suggesting smaller copay changes do affect utilization.6,7

The second issue relates to whether the response to copays extends to important services or whether the foregone consumption offered no benefit. Again, we believe the gold standard is the RAND HIE, which demonstrated that consumers reduced the use of both high- and low-value services in response to higher copays. In fact, the literature reviews cited above are all generally consistent with this view. Again, exceptions can be found (eg, emergency department use in the RAND HIE), but we believe identification of one setting or situation in which consumers appear to have responded to increases in costs by reducing only inappropriate use does not negate the evidence that often they also reduce their use of valuable services.

The third, and most important, issue is whether the reduction in the use of highvalue services causes adverse health consequences. The RAND HIE suggested that adverse health consequences were small and concentrated in low-income individuals with chronic disease. This presents somewhat of a paradox given the first 2 points. This has been explained by the RAND study authors as reflecting an offsetting impact of harm from reduced use of important services and benefit from reduced use of potentially harmful services.

As we note in our commentary, it is unclear if this finding applies to today’s environment, which is more reliant on services for chronic disease management, including prescription drugs. We certainly think the evidence, which includes several well-controlled studies, suggests cause for concern.6,8 Even the article by Lu et al cited by Ms Fairman expresses concern that formulary-based interventions (including, but not limited to, increased cost sharing) may have deleterious health consequences.

Yet more importantly, we argue that Value-Based Insurance Design benefit packages can be created that mitigate the risk of adverse health consequences from higher cost sharing. Research increasingly allows us to identify situations in which care adds value (relative to alternatives) and situations where value is less certain. Thus we believe it is unnecessary, and likely counterproductive, to address concerns about costs by requiring patients to pay more for those services we would like them to consume.

Michael E. Chernew, PhDDepartment of Healthcare Policy

Harvard University Medical School

Boston, MA

Joseph P. Newhouse, PhDDepartment of Healthcare Policy

Harvard University Medical School

Boston, MA

Funding: None reported.

Author Disclosures: Dr Chernew reported having served as a consultant to Pfizer, Inc, ActiveHealth Management, Hewitt Associates, Abbott Laboratories, and Covidien. Dr Newhouse is on the board of directors for Aetna and owns stock in that company.

Address correspondence to: Michael E. Chernew, PhD, Department of Healthcare Policy, Harvard University Medical School, 180 Longwood Ave, Ste 207, Boston, MA 02115. E-mail: chernew@hcp.med.harvard.edu.

1. Chernew ME, Newhouse JP. What does the RAND Health Institute Experiment tell us about the impact of patient cost sharing on health outcomes? Am J Manag Care. 2008;14(7):412-414.

2. Leibowitz A, Manning WG, Newhouse JP. The demand for prescription drugs as a function of cost-sharing. Soc Sci Med. 1985;21(10):1063-1069.

3. Gibson TB, McLaughlin CG, Smith DG. A copayment increase for prescription drugs: the long-term and short-term effects on use and expenditures. Inquiry. 2005;42(3):293-310.

4. Goldman DP, Joyce GF, Zheng Y. Prescription drug cost sharing: associations with medication and medical utilization and spending and health. JAMA. 2007;298(1):61-69.

5. Lu CY, Ross-Degnan D, Soumerai SB, Pearson SA. Interventions designed to improve the quality and efficiency of medication use in managed care: a critical review of the literature—2001-2007. BMC Health Serv Res. 2008;8:75.

6. Chandra A, Gruber J, McKnight R. Patient cost-sharing, hospitalization offsets, and the design of optimal health insurance for the elderly. 2007; National Bureau of Economic Research. Working Paper No. W12972.

7. Chernew ME, Shah MR, Wegh A, et al. Impact of decreasing copayments on medication adherence within a disease management environment. Health Aff (Millwood). 2008;27(1):103-112.

8. Hsu J, Price M, Huang J, et al. Unintended consequences of caps on Medicare drug benefits. N Engl J Med. 2006;354(22):2349-2359.

Related Videos
Related Content
© 2024 MJH Life Sciences
All rights reserved.