When Is It Less Acceptable for Patients to Face Higher Cost-Sharing?

A new study explores when variation in consumer cost-sharing makes sense, and when it is less acceptable for patients with the same or similar conditions to have different out-of-pocket costs, as well as the implications for health plans and employers who are designing and buying benefits.

Our health care delivery system is filled with “carrots and sticks,” intended to help consumers and patients achieve better outcomes while encouraging judicious use of resources. Shifting some of the cost of treatments to patients–through mechanisms such as tiered formularies and co-pays and coinsurance–are among the sticks tucked into health benefit plans. It’s important to recognize, however, that cost-sharing structures are based on the cost of the medication or service, not on the appropriateness of the treatment or its value to the consumer or patient.  

Though cost-sharing is a long-standing feature in benefit design, it comes with the potential for both intended and unintended impacts. Patient treatment needs are diverse, whether because of biology, genetics, co-morbidities, or socioeconomic factors, which means that preferred, or “tier 1” treatment options don’t always hit the mark for all patients. Medications placed on these tiers may require patients to pay some or no costs, while health plans may require patients to pay greater out-of-pocket expenses for other medications not on the preferred formulary tier. When cost barriers to other treatment options are too high, patients often won’t access or adhere to treatments that are clinically appropriate and work best for them. 

So, when does this variation in copayments make sense, and when it is less acceptable for patients with the same or similar conditions to have different out-of-pocket costs?  What are the implications for health plans and employers who are designing and buying benefits?

That’s the question explored recently by researchers from the National Pharmaceutical Council, along with experts from Foley Hoag, Milliman, Midwest Business Group on Health and Solid Benefit Guidance. To delve into the question, they engaged a roundtable of payer, patient and employer experts to assess treatment case studies in four conditions – step therapy for rheumatoid arthritis, treatment based on diagnostic testing results for cystic fibrosis, patient preference for a treatment due to potential side-effect tolerability among patients with fibromyalgia and patient preference for the route/frequency of administration for an osteoporosis treatment. 

The panel determined that some scenarios are less acceptable for patients to pay a higher out-of-pocket cost than others. Their insights led to the development of five guiding principles:

  1. “Try and Fail” is important: If the initial lower-cost therapy is unsuccessful, patients should have access to higher-cost therapy and lower out-of-pocket costs. This is also known as “reward the good soldier.”
  2. Benefits are certain and significant: If there is high confidence the health benefits of a treatment are significant, then financial barriers should be lowered.
  3. Costs must align with benefits: If the treatment costs are balanced with better effectiveness and safety, then cost-sharing should be lower.
  4. Penalties because of “bad luck,” not preferences, should be mitigated: If patients need higher cost treatments based on their biology or genetics, then cost-sharing should be reduced.
  5. Lower, but do not eliminate differences in out-of-pocket costs: Cost-sharing differences incentivize trying lower-cost treatments first, but big jumps in patient costs should be avoided.

The panel recognized that putting the principles into practice will require tackling practical barriers.  First, evidence about which treatments work for which patients, including patient sub-populations, must be available to decision-makers. Other critical factors? Tools must be in place to connect the dots between benefits, patient information and care decisions; promote patient consumerism to support “savvy shoppers”; balance cost-sharing, premium, and deductible impacts for patients; and avoid unintended consequences for employees, health plans, and patients and consumers.

Stakeholders agreed that we need to continue giving patients and health care providers a reason to avoid unnecessary and inappropriate care, but to truly succeed in moving from volume to value, cost-sharing mechanisms need to align patient costs with care that achieves better health outcomes.

Read the study in the Journal of Managed Care & Specialty Pharmacy and view NPC's infographic. For more on “rewarding the good solider,” an NPC-supported paper, "Exploring 'Dynamic' Cost-sharing Models in Value-Based Insurance Design," authored by Dr. Mark Fendrick of the Value-Based Insurance Design Center at the University of Michigan, explores the topic.