[Congressional Record Volume 144, Number 118 (Wednesday, September 9, 1998)]
[Extensions of Remarks]
[Pages E1655-E1656]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]


 WHY PATIENT COST-SHARING SAVES LITTLE: THE HEALTH LESSONS FROM EUROPE

                                 ______
                                 

                            HON. PETE STARK

                             of california

                    in the house of representatives

                      Wednesday, September 9, 1998

  Mr. STARK. Mr. Speaker, various Members of Congress frequently say 
that one of the ways to save Medicare is to require the patient to pay 
a higher share of the cost--thus making the patient a more careful 
consumer and reducing the demand for care.
  Following is a portion of a 1997 study published by the World Health 
Organization entitled, ``European Health Care Reform,'' which shows why 
such an approach will save little, but of course will greatly increase 
the burden on the poorest and sickest in our society. This portion of 
the study is also interesting in that it shows that in most foreign 
countries, patients have much more time with their doctor and have much 
longer hospital length of stays than Americans--yet those foreign 
societies spend about 30 to 40% less than we do on health care.
  Before Americans push more of the burden of Medicare onto the poor 
and sick, we should look to the lessons from abroad.

                      The Effects of Cost Sharing


                        total health expenditure

       Evidence suggests that cost sharing reduces utilization but 
     does not contain costs. Overall costs are not contained 
     because cost sharing is a set of demand-side policies, and 
     costs are primarily driven by supply-side factors. 
     Intercountry comparisons indicate that the United States has 
     lower rates of contact with physicians and beddays per head 
     of population than many other countries, including Canada, 
     France, Germany, Japan and the United Kingdom, but costs in 
     the United States are much higher relative to GDP than in 
     these other countries. This strongly suggests that it is the 
     intensity of care provided per contact in the United States 
     that is responsible for this apparent paradox (198). The 
     United States has the highest out-of-pocket expenses, mostly 
     to meet cost-sharing obligations; it also has the highest 
     overall costs. Other countries have lower cost-sharing and 
     higher utilization rates, but lower costs. This does not mean 
     that cost sharing causes higher costs; it means that measures 
     other than cost sharing (supply-side measures such as 
     budgetary controls) are much more effective mechanisms for 
     cost-containment.
       The Rand Study (199,200) suggests that cost sharing is 
     associated with a decrease in total health spending, but the 
     design of the experiment does not really permit strong 
     conclusions to be drawn about the consequences for total 
     expenditure of the broad implementation of cost sharing 
     within a retrospective reimbursement system. The reason is 
     that providers may compensate for a reduction in consumer-
     initiated demand by inducing increases in service volume or 
     intensity. Table 9, which shows intercountry data (198) on 
     contacts with physicians, hospital days and health 
     expenditure as a percentage of GDP, suggests that consumer-
     initiated demand is not the major factor driving health care 
     costs. Rather, it appears to be the intensity of services 
     provided. Since intensity is largely provider initiated, 
     there is little scope for cost sharing to make much of an 
     impact on the overall level of spending. . . .

[[Page E1656]]



 TABLE 9. HEALTH CARE UTILIZATION AND EXPENDITURE IN SELECTED COUNTRIES,
                               AROUND 1990                              
------------------------------------------------------------------------
                                     Contacts                Expenditure
                                       with       Bed-days       as a   
             Country                physicians    per head    percentage
                                     per head                   of GDP  
------------------------------------------------------------------------
Canada...........................          6.9          1.5          9.5
France...........................          7.2          1.5          8.8
Germany..........................         11.5          2.3          8.3
Japan............................         12.9           --          6.7
United Kingdom...................          5.7          0.9          6.2
United States....................          5.5          0.9         12.2
------------------------------------------------------------------------

                          equity in financing

       Has cost sharing led to a relatively greater burden of 
     health care financing falling on lower-income households? 
     Based on data from the 1980s, Switzerland and the United 
     States were found to have the most regressive health 
     financing systems out of ten OECD countries studied (201). 
     This finding was attributed to their heavy reliance on both 
     private health insurance and private out-of-pocket payments. 
     The latter were found to be very regressive in these two 
     countries because, in most instances, cost-sharing 
     obligations apply irrespective of the patient's income.
       The equity consequences of cost sharing in France are 
     unclear, because there is no direct relationship between 
     income and complementary insurance coverage. Employees in 
     small firms and young people, as well as the unemployed, are 
     less likely to have complementary insurance. This suggests 
     that voluntary complementary insurance that cover the cost-
     sharing obligations of a national insurance system can lead 
     to a disproportionate financial burden (and probably 
     inequitable access as well) for those unable to purchase that 
     coverage.
       Evidence from Kyrgyzstan suggests that the mix of formal 
     and informal charges to users of health services increased 
     inequities in financing. The out-of-pocket costs of a single 
     episode of illness could impose a substantial financial 
     burden on many households. In 20% of cases, the total costs 
     of an episode for an individual exceeded the monthly income 
     of his or her entire household. Almost 50% of inpatients 
     reported severe difficulties in finding the money to pay for 
     their stay, and one third of them borrowed money to pay for 
     their hospital charges. Capital items were often sold (farm 
     animals in rural areas, consumer goods in urban areas) to 
     raise the necessary money. Overall, there is evidence that 
     the incidence of out-of-pocket payments for health is 
     inequitable, i.e. it creates more of a burden for poorer 
     households and individuals (197).


                               conclusion

       Cost sharing does not provide a very powerful policy tool, 
     either for improving efficiency or for containing health 
     sector costs. Because of the importance of providers in 
     influencing the main drivers of health sector costs, policies 
     that address the supply side of the market are likely to be 
     much more powerful than those that act solely on the demand 
     side. Cost sharing will reduce consumer initiated 
     utilization, but such reductions will not be effective for 
     cost-containment. This is because the main influence on 
     health care costs is service intensity, which is provider 
     driven.
       The appropriateness and likely effects of cost sharing 
     depend on the services to which it is applied, and on the 
     broader context of the provider payment system. The use of 
     cost sharing as a tool to limit demand is relevant only when 
     applied to first-contact services. For (provider-initiated) 
     referral services, cost sharing has little impact on 
     utilization and is thus of little relevance in terms of 
     efficiency. In systems in which providers are reimbursed 
     retrospectively, reductions in consumer-initiated utilization 
     caused by cost sharing will encourage providers to increase 
     the volume of services per patient contact (i.e. service 
     intensity) in order to maintain their incomes. In such 
     systems, therefore, cost sharing does little to restrain cost 
     growth because the available evidence suggests that providers 
     can--and do-- respond to a drop in consumer-initiated 
     utilization by stimulating an increase in the use of 
     diagnostic and therapeutical services. In systems where 
     providers are prepaid, there are no obvious incentives for 
     this response, but the effects of cost sharing are still 
     likely to be marginal because supply-side incentives are 
     enough to restrain growth in expenditure.
       Without compensatory administrative procedures, cost 
     sharing causes inequity in the financing and receipt of 
     health services. Unless cost sharing is related to income, 
     co-payments and co-insurance will impose a greater burden on 
     the budgets of low-income households. Without specific 
     measures to exempt low-income groups from out-of-pocket 
     charges, access to care will depend on income levels. 
     Evidence consistently shows that direct charges deter poorer 
     people from using services to a greater degree than they 
     deter the better-off. These limitations on access may result 
     in adverse health effects for poorer and sicker groups of the 
     population. To protect equity, therefore, measures are needed 
     to compensate for the consequences of cost sharing on poorer 
     members of society.
       As a means of mobilizing revenue for the health services, 
     direct charges to patients are not likely to generate 
     substantial amounts without causing adverse consequences in 
     terms of equity.

     

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