Finance Technical Advisory Committee recap: Why cost sharing is not the way to lower the cost of health care
By Consuelo Echeverria
Once again, the Finance Technical Advisory Committee is off track. Rather than choose a benefit design from the many models that already exist in Washington, such as the benefits offered to Washington's Medicaid enrollees or public and state employees, the July FTAC was a deep dive into cost sharing with no model to pin it on. Furthermore, they posited that cost sharing was the most effective tool to lower the cost of care with little examination of the literature or how other countries provide affordable healthcare that is accessible by all of their citizens.
We have solutions!
Firstly, what is cost sharing? As Grober, 2006, pointed out cost sharing in the form of copayments, coinsurance, and deductibles, is a trade-off between financially protecting patients and the possibility of patents overusing care. In other words, there is a ‘moral hazard’ when patients pay less for health care than its full costs and having patients pay a percentage of their health expenses gives an incentive to reduce inappropriate use of their providers, medical tests and medications.
However, questioning this assumption, Baicker et al, 2015, found that moral hazard was unable to explain why one does or does not use health care. A striking example from her paper was diabetic patients who underutilize health care despite the possibility of grievous harm such as loss of limb, blindness and premature death. In the universe of moral hazards, those patients would be over utilizing care not underutilizing it, at grave risk to health and life.
Furthermore, a quick Google Scholar review found, not surprisingly, that cost sharing impacts the most vulnerable. For example, Roberts, 2021, found disabled patients under 65, those with multiple chronic conditions or functional limitations, and the near-poor (15,000-$25,000 yearly income), had 2-3 times the odds of reporting difficulty affording care than healthier or wealthier individuals. He appropriately highlights that “those who are least able to forgo care are also the least able to afford care.”
Cost sharing also impacts a patient's access to their medication. Chandra et al, 2024, found that when out of pocket payments increased for Medicare patients most likely to have a heart attack, the result, not surprisingly, was they cut back on their meds. Interestingly the study found that patients appear unaware of the risks with only one-third believing that stopping their drugs for up to a month could have any serious consequences. The study concluded that “far from curbing waste, cost sharing is itself highly inefficient, resulting in missed opportunities to buy health at very low cost.”
Overall, the tenor of the findings was:
- Cost sharing reduces use of vital care for poor folks and sick folks.
- There is no evidence that cost sharing leads to cost savings.
However, there is evidence that other tools such as global budgets, the state being the primary payer as in British Columbia Canada, the consolidation of billing- and insurance-related (BIR) costs including the costs of claims management, clinical documentation and coding, and prior authorization to a single code and getting rid of the middlemen all have been proven in other countries to reduce the cost of health care.
We are disappointed that the actuarial study done for the Universal Health Care Work Group was not discussed. Fortunately, HCFA-WA did discuss how we want the legislature to use the Work Group findings to expedite publicly funded universal health coverage in Washington. Please watch Universal Health Care Work Group Findings Explained, followed by Q and A.
Finally, the striking gaps in knowledge surrounding the single payer universal health care models of other countries were noticeable. It seems odd that the FTAC and the UHCC have not been willing to model WA’s health care system on the successes of Japan, Singapore, some Northern Europe countries, and Cuba who consistently have some of the best health outcomes globally.
Join us as we track the next meeting of the UHCC on Thursday, August 15, 2024 at 2-5 p.m.
We encourage you to:
- Sign up to provide public comment by 5 p.m. the day before the meeting occurs.
- We urge our members to push for a single payer plan in their public comments.
- Read our take on past UHCC and FTAC meetings