Memorandum submitted by Professor Donald
Light (CP 3)
This testimony is based on the accompanying
systematic review of all qualified studies in English published
between 1977 and 2002 on the effects of user fees for prescription
drugs in vulnerable populations. The review looks at a variety
of mechanisms for cost sharing including flat co-payments, multi-tiered
co-payments, and deductibles paid by patients, as well as reimbursement
limits above which patients pay the entire amount. These 25 qualifying
studies document that co-payments and other charges cause clinical
harm in an effort to hold down expenditures. They are penny-wise
and pound-foolish.
By their nature, co-payments and charges can
only save money by forcing patients to make decisions about whether
or not to see a doctor, fill a prescription and then take the
drugs as prescribed, or see a dentist about a problem. Changing
the nature of these decisions could potentially save money but
only by seriously discriminating against the most severely ill
patients; the sickest 2% and 10% of patients consume 41% and 72%,
respectively of all health care expenditures. Every study we know
of done in Europe or North America documents again and again over
the past 15 years that co-payments and other charges contradict
the goals of a good health care system, harm patients, save little
money, and generate little revenue.
Co-payments and other charges discriminate sharply
by income, constituting a burdensome expense for lower- and working-class
patients. The greater the share of a household budget that a disincentive
represents, the more effectively will user fees reduce consumption
of medicines needed by patients. Even small co-payments have resulted
in significant reductions in use lower-income patients.
Since poorer people are more likely to be sick,
and sicker people use many more drugs, user fees are an effective,
well-targeted way to reduce the amount that the state spends on
drugs. Studies show this reduction leads to significant increases
in hospitalisation and emergency-room visits, but those costs
occur on someone else's budget and thus represent false savings.
The segmented budgets within the NHS assure that cost-shifting
and care-shifting to other budgets will seem to save money, at
least in the short run, but even greater costs occur down the
road.
Co-payments and other charges increase the very
inequalities that current policy aims to reduce. They remove coverage
and undermine the goal of universal health care. They are an example
of the Inverse Coverage Law, that in cash and private insurance,
coverage varies inversely with need. Ironically, co-payments and
other charges frustrate the goal of prevention which is getting
patients to see their primary care provider when they think they
have a problem, and using drugs that their doctors judge they
need. Why are co-payments being used at all?
If co-payments and charges reflect the goals
of the NHS, the system should move away from the principle of
free at the point of service and towards having patients pay for
their medicines. The Nobel laureate in economics, James Buchanan,
pointed out in a notable report what he regarded as the "inconsistencies
of the NHS"; that the cheaper something is, the more of it
will be consumed, and free goods will induce infinite demand.
This is basic economics, he wrote, and obvious to any thinking
person. Buchanan likened the NHS principle of "free at the
point of delivery" to offering free beer. The NHS is doomed
to go bankrupt, he argued, if it offers free services, like free
beer.
However, Buchanan overlooked several important
points. First, as Robert Evans[91]
has pointed out, health care is not like beer or other goods people
buy, because health care is desirable only for its (intended)
positive effect on health status; consuming health care is not
inherently pleasant and there is no rational incentive for anyone
to use it, unless they think it is needed because of a concern
about their health. Second, as has been documented by the Canadian
Health Services Research Foundation, [92]patients
do not control most health care expenditures, because doctors
are the gatekeepers and make all of the expensive decisions (eg
admitting to hospital and ordering tests). Finally, it is clear
globally that public one-payer systems such as the NHS or Canadian
Medicare have consistently controlled costs much better than does
the U.S. with its high charges and partial health care coverage.
In the former, those running the system can restrain both supply
and demand more effectively and more equitably. This point is
still true today. Co-payments and other charges advance the current
privatization of the NHS, moving it closer to the kind of system
the United States has, where the provision of medical care is
increasingly dependent on patients paying cash. To be consistent,
doctors and dentists should also be charged, to discourage them
from seeing patients or prescribing medicines!
There is one positive and evidence-based application
for co-payments, applying fees to encourage patients to use the
most cost-effective drug available for their condition: a system
known as reference pricing. Under reference pricing, public drug
coverage is automatically available for the cost of the designated
reference drug within a therapeutic class. (A therapeutic class
is a family of drugs, not chemically the same, used to treat the
same medical condition. Independent expert review of the evidence
is used to group drugs into therapeutic classes.) If patients
want to use a more expensive drug in that therapeutic class, they
pay the difference in cost. In cases where the reference (first-line)
drug is inappropriate (for instance due to comorbidities) or causes
unacceptable side effects, the physician can obtain a special
authority for the patient to use a higher-cost alternative without
paying the additional charge. Thus co-pays serve to keep overall
costs down, yet support clinically appropriate prescribing. British
Columbia's Pharmacare program uses reference pricing, and it has
been shown to reduce costs without leading to negative clinical
outcomes.[93],[94]
Denmark and other countries operate similar schemes, with similar
results. It is important to note that such a system also gives
the right incentives to pharmaceutical companies, to spend less
on derivative variations of existing drugs and more on clearly
superior drugs. That is, after all, what patients, doctors, and
society want them to do.
Recommendation: Eliminate current co-payments
and other charges so that prevention, quality care, more equitable
access by social class, and patient adherence to professional
advice are increased. Consider using co-payments to enhance clinically
more appropriate prescribing. Adopt reference pricing to control
drug budgets while providing patients with the medications they
need.
Professor Donald Light
Princeton University, USA
22 November 2005
91 Evans R Strained mercy: the economics of Canadian
health care. Toronto: Butterworths, 1984. Back
92
Canadian Health Services Research Foundation. Myth: user fees
would stop waste and ensure better use of the healthcare system.
Ottawa, Ontario: Canadian Health Services Research Foundation,
2005:1-2. Back
93
British Columbia Ministry of Health. Pharmacare: Reference drug
program. Vol 2005: British Columbia Ministry of Health, 2005 (July). Back
94
Canadian Health Services Research Foundation. Reference-based
drug insurance policies can cut costs without harming patients.
Evidence Boost. Ottawa, Ontario: Canadian Health Services Research
Foundation, 2005 (June):1-2. Back
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