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Higher Co-Pays Mean Fewer Prescriptions

But is worker health the trade-off?

TUESDAY, Oct. 8, 2002 (HealthDayNews) -- When your boss switches to a health plan that boosts your co-payment for prescription drugs, you spend a bit more and you take fewer pills.

That's the conclusion of a new study by California researchers who analyzed the impact on drug spending when co-payments rise. Their report appears in tomorrow's Journal of the American Medical Association.

How these changes affect employees' health isn't known, the researchers say. However, many people struggling with higher out-of-pocket expenses have chronic diseases, such as high blood pressure and asthma, for which they take several drugs.

While insurance plans reap nearly all the initial cost savings from the reduction in drug spending, employees eventually see the benefit in the form of lower premiums, the researchers say.

"It's quite surprising that small changes in co-payments can actually save plans so much money," says study co-author Dana Goldman, director of health economics at RAND, a Santa Monica research group.

Consumer drug spending is the fastest-growing segment of the health-care economy, rising more than 17 percent between 1999 and 2000. For private insurers, the increase was even greater, approaching 20 percent. Not surprisingly, businesses that provide health insurance for their workers have been struggling to contain these runaway costs.

One attempt has been to control the drug benefits they offer employees, either by requiring them to purchase cheaper generic drugs whenever possible or by graduating the co-payments for prescriptions.

In the latest study, the researchers looked at claims data from more than 420,000 workers, aged 18 to 64, at 25 large companies between 1997 and 1999. Most of the businesses were self-insured, but some arranged coverage through insurance firms.

The study compared costs in plans that had a flat $5 or $10 co-pay for prescriptions with those generated by two-tier and three-tier plans. These staggered plans offer generic drugs for a low co-pay, but employees must pay more for costlier, brand name medications.

Under the one-tier system, the average drug cost per worker was $725 for the $5 co-pay and $563 when the co-pay doubled to $10.

Doubling the co-pay in a two-tier plan from $5 or $10 to $10 or $20 slashed per-member spending on drugs from $678 to $455. When a $30 tier was added to that system -- covering drugs that weren't favored on the plan's prescription list -- drug spending dropped an additional 4 percent.

Plans that forced workers to buy generic drugs when available also drove down costs significantly, by 8 percent, or up to $52 a person, for two-tier systems, the researchers found.

As co-payments rose, employees paid nearly 50 percent more to have prescriptions filled. In the two-tier system, for example, when the co-payment doubled, workers' share of the drug dollars leapt from 17 percent to 25 percent.

However, the true dollar figure was fairly modest, increasing from an average of $123 in the flat $5 co-pay plan to $141 in the three-tier system. Costs varied widely, however, within the various plans.

"I think injecting some price sensitivity is a good thing," says Geoffrey Joyce, a RAND economist and a co-author of the study. "Paying a $5 co-pay regardless of the cost of a drug doesn't send the right message to consumers."

On the other hand, Joyce says, most health plans don't assign drugs to tiers in a smart way. Rather than base these decisions on the effectiveness of a treatment, they favor one drug over another by the discount they get from the company that sells it.

Joyce says the study shows that three-tier plans don't save much money over two-tier systems, and "aren't the panacea" companies may expect. These plans have become increasingly popular lately, he adds.

The RAND researchers didn't study whether employees forced to pay more for prescriptions forgo necessary drugs and suffer ill health as a result.

However, Donald M. Steinwachs, a health policy expert at Johns Hopkins University's Bloomberg School of Public Health, says that's a strong possibility.

As co-payments climbed, the number of prescriptions filled dropped by more than 30 percent, from roughly 12 to nine a year per worker, the RAND study found.

"If you don't fill your prescriptions, one has to be concerned that you're not getting all the treatment you might get," says Steinwachs, author of an editorial accompanying the journal article.

"Will there be these adverse health consequences because people are cutting back too much? That's the next question for us," Goldman says.

What To Do

For a consumer's guide to health insurance, try this site from Georgetown University or the Agency for Healthcare Research and Quality.

SOURCES: Dana Goldman, Ph.D., director, health economics, and Geoffrey Joyce, Ph.D., economist, RAND Health, Santa Monica, Calif.; Donald M. Steinwachs, Ph.D., professor and chairman, department of health policy and management, Bloomberg School of Public Health, Johns Hopkins University, Baltimore; Oct. 9, 2002, Journal of the American Medical Association
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