Patient Cost Sharing

By sharing the costs of care with patients, health insurers aim to manage spending and encourage more efficient health care resource use. But these strategies may create unintended consequences on patient adherence to treatment, health outcomes and overall health-system costs.

What is patient cost sharing? 

Patient cost sharing involves tiered formularies, in which patients pay copays or coinsurance out-of-pocket (OOP). They are a strategy used by payers to manage costs and encourage more efficient health care resource use. 

How does it impact patients?  

Research associates patient cost sharing designs – including copays, coinsurance, and deductibles – with the potential for both intended and unintended impacts on adherence, costs, and health outcomes. 

Because cost sharing is typically calculated based on tier placement rather than medical appropriateness, out-of-pocket expenses can vary for patients with the same or similar condition. When lower-cost alternatives provide equal or greater benefits for all patients, treatment is straightforward. However, when higher-cost, higher-tier medications provide greater benefits for some patients, incentivizing beneficiary engagement through cost sharing requires nuance. 

Reducing or eliminating patient cost sharing can help improve care delivery and promote quality of care. 

What does research tell us? 

In our study “Does a One-Size-Fits-All Cost-Sharing Approach Incentivize Appropriate Medication Use? A Roundtable on Fairness and Ethics Associated with Variable Cost Sharing,” we explored strategies for incentivizing optimal use of medications.  

To identify and discuss the trade-offs associated with variable cost sharing in pharmacy benefits, a multi-stakeholder roundtable of patient, payer, and employer representatives was convened. Roundtable participants reviewed an ethics framework, an actuarial analysis, a legal white paper, as well as other background materials and were asked to consider “when it would be more or less acceptable to require higher patient cost sharing; what is the optimal distribution of financial burden across patients, all plan members, and employers; and what are the existing barriers and potential solutions to align OOP costs with medically appropriate treatments.” 

The roundtable identified five guiding principles in which cost sharing obligations would be particularly problematic: 

  • If the initial lower-cost therapy is unsuccessful, patients should have access to higher-cost therapy and lower out-of-pocket costs. 
  • If there is high confidence the health benefits of a treatment are significant, then financial barriers should be lowered. 
  • If the treatment costs are balanced with better effectiveness and safety, then cost sharing should be lower. 
  • If patients need higher-cost treatments based on their biology or genetics, then cost sharing should be reduced. 

Cost sharing differences incentivize trying lower-cost treatments, but big jumps in costs for patients should be avoided.  Incorporating these principles in future policies related to benefit design may incentivize improvements in care delivery and promote more appropriate care for patients.