Shifting Costs onto Consumers May Create Long-term Problems

There are so many studies and surveys in healthcare that sometimes an important one gets lost in the mix—especially with the myriad health reform studies comparing the House and Senate plans.

That was the case with a study released last Friday that has ramifications not only to CMS and policymakers, but health insurers—whether they offer Medicare Advantage or not.

Researchers from Kaiser Permanente Medical Care Program and David Geffen School of Medicine at UCLA compared drug costs and adherence among Medicare beneficiaries with a standard Part D coverage gap versus those with supplemental gap coverage in 2006. Using pharmacy data from the Medicare Advantage Prescription Drug plans, researchers looked to see how the so-called Medicare doughnut hole is affecting seniors and their care.

The doughnut hole requires seniors to pick up the tab for prescription drugs once their annual drug costs reach $2,250 and until the total reaches $3,600. The belief behind the doughnut hole is that transferring costs onto the beneficiary will reduce over prescribing and force beneficiaries to make wiser healthcare decisions.

What researchers found was that Medicare beneficiaries with diabetes in the doughnut hole experienced lower drug costs (3-4% lower), but the bad news is that they had much higher out-of-pocket spending and worse medication adherence to three chronic drug classes.

These results should not surprise anyone—and shows the dangers of shifting costs onto consumers. If people need to choose between food and their blood pressure medication, everyone will side with eating.

How the Medicare Study Links to Group Health Insurance

Some insurers may see that the study involved Medicare beneficiaries and dismiss it as not pertaining to their group health insurance. Although this study targeted the Medicare Advantage population, all health insurers and employers should take note. Shifting healthcare costs to the individual will save money in the short-term, but could have long-range cost implications if the members are not following medication regimens.

There is no better example of how this cost-shifting can affect member health than high-deductible health plans. If these plans are coupled with member education and tools, they have the potential to lower costs and create more informed healthcare consumers. The problem is that high-deductible plans are often lacking in the area of member engagement and tools.