Higher Visit Co-pays Backfire
Visit co-pays are supposed to be disincentives to excessive outpatient doctor visits and are designed to reduce over-utilization of medical resources by hypochondriacs, Munchausens, and Medicaid patients who just got their benefits. Co-pays make sense but not as a one-size-fits-all cost control measure. It makes sense to charge a relatively healthy patient $20 for visits that are likely to be largely noncritical but what about the elderly for whom multiple doctor visits are critical for proper medical management of multiple chronic co-morbidities? A new study looked at 900,000 Medicare patients in 36 different plans, half of which increased their co-pays from 2001 to 2006.
Enrollees in plans whose co-pays for a trip to a specialist nearly doubled to $22 had a hospitalization rate that was 8.7 percent higher than among people whose co-payments remained unchanged, averaging $11.38.
And yes, this ended up costing the plans much more in the long run.
The average health plan, for every 100 enrollees, would gain $7,150 from collecting more co-payments and from decreased use of outpatient services, but that same plan would spend approximately $24,000 in additional hospital expenses.
It doesn’t make sense to economically penalize the elderly and those with chronic medical conditions for utilizing outpatient medical services when the use of these services and regular medical visits are designed to reduce the risk of medical complications and the associated expenses of advanced care (not to mention pain and suffering). One cost control measure ends up destroying the efforts of another cost control measure because we don’t know how to properly utilize these. And this phenomenon was even worse for Medicare beneficiaries who were the most sensitive to co-pay pressures.
Requiring co-payments turned out to be especially costly to insurance companies when their subscribers were poor, poorly educated, black or had underlying health problems like diabetes, high blood pressure and a history of heart attack.
Clearly we can’t just apply economic disincentives to all patient populations and clearly outpatient ambulatory costs are less than inpatient costs. Even the fee-for-service Medicare model of paying only for each visit doesn’t make sense in these populations. But this is a topic for another article.