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The “Vitality” of Cost-Sharing

October 17, 2016

“How much will I spend on healthcare?”

This is a question that daunts many American individuals, college students, employers, employees, and families.

By Sophia Busacca, N’18

The retreat from tightly managed care in the 1990s led to a larger provider network and less restrictions on care, which then led to higher insurance spending and costs.[1] Health insurance rose and employers shifted more health insurance costs to the employees; however, many patients lacked a financial stake while making decisions in regards to their healthcare.1 Without some sort of personal financial risk, patients often do not think about the costs of treatment and devices, and this causes “moral hazard” or an overuse of treatment.

Health Insurance is both a hot-button issue, and a critical one. Right now, one of the most controversial issues in the United States in the realm of healthcare is cost-sharing.  Cost-sharing is partially controversial, because the United States has one of the largest GDP healthcare expenditures among other OECD countries at 17.1 percent, whereas the average for OECD countries is 12.2 percent.[2]

Cost-sharing is complicated and has a variety of aspects that have to be considered. For example, inpatient facility stays, inpatient physician services, physician office visits, specialist and primary care physician office visits, emergency room visits, and prescription drugs all have different cost-sharing intricacies.

Cost-sharing is defined by HealthCare.gov as “the share of costs covered by your insurance that you pay out of your own pocket.”[3] The patient, insurance provider, and healthcare provider all share the financial risk under cost-sharing. The marked difference is that the patient now has a personal financial risk; whereas before there was no incentive for the patient or provider to be cost-effective.

Cost-sharing will cause consumers to think more about what services they really need. Because consumers will have a personal financial risk, they may not opt for the most expensive options, but rather look for alternatives. Cost-sharing will not only create a financial risk for the consumer, but will also cause a conversation between the patient and the healthcare provider on different health services. The end goal of cost-sharing is to reduce “moral hazard” in the healthcare setting. Cost-sharing can be seen in private insurance, Employer-sponsored insurance, and on the Marketplace with the Affordable Care Act.

With the induction of Affordable Healthcare Act in April 2010, all Americans are required to purchase insurance either through the public sector or the private sector.

The health plans available on the marketplace are organized into metal tiers by potential exposure to out of pocket costs based on a concept known as actuarial value. Actuarial value is the percent of covered services out of total costs for all enrollees, or services that are paid for by the insurer as opposed to the costs paid out-of-pocket by the enrollee[4]

 Cost-sharing reductions are also available on the marketplace. These cost-sharing plans are specialized for people who have incomes between 100 and 250 percent of poverty and are enrolled in a silver plan. These subsidies work in conjunction with the silver plan by increasing in actuarial value (73, 87, and 94 percent).[2]

Cost-sharing varies with different private insurance plans, employer-sponsored insurance, and metal tiers on the Marketplace. An example that the Kaiser Family Foundation gave to further explain this concept was on two different silver plans in Texas available on the Marketplace. One silver plan in Texas had a 5,900 dollar deductible, 0 dollar copay for physician visits, and no cost-sharing for inpatient care after the deductible is met. The second plan had no deductible, a 30 dollar copay for physician visits, and a 40% coinsurance for inpatient care.[3] The first plan would be best for someone who needs to regularly see the doctor and the second plan is better for a relatively healthy person. It is important that people are guided to select plans that best suit their needs.

In order to make cost-sharing public and consumer-friendly, the ACA requires a Summary of Benefits and Coverage for people to make decisions. This is to allow people to make comparisons and decide what plan to choose and select the best plan for their needs.

As a nursing student interested in health policy, I believe that in order for a patient to make a health decision, they need to have a clear understanding of the price tag. However, I still advocate that every patient be directed to a health plan that will benefit and cover them properly.

Cost-sharing is necessary today, because it causes a patient and doctor to not abuse the medical system. It helps the patient have some financial risk and question the doctor on different treatments, medications, and devices. This will lead to a discussion between the patient and the healthcare provider about treatment options.

Cost-sharing is seen all across healthcare. In inpatient physician services, enrollees typically have to pay a percentage of the cost from when they saw a physician in the hospital. Often times, the patient will first need to meet the deductible before they start paying additional costs through coinsurance. Physician office visits do not vary much from the way an enrollee will pay for an inpatient physician visit. Most times plans will require the enrollee to participate in some type of cost-sharing, but first have to meet a general medical deductible. Some will, however, pay for a small number of office visits before the deductible has been met. The most critical compulsory element of physician office visit that does not allow cost-sharing is primary care or specialist office visits for preventative care. [3]

I believe that seeing a doctor is a right to all people in the United States. However, to create a fair system we must make all the stakeholders reliable. This means the insurance provider, physician, and the patient all must have a financial risk when making a decision, no matter if the provider is private, employer based, or on the Marketplace with the government,. This will help the United States begin to reduce our healthcare GDP and provide healthcare coverage to a broader range of people.

Cost-sharing is changing the way that our generation thinks about healthcare. It is vital for our society and creates an insurance system that covers many Americans and creates a provider-patient discussion.

 

References

  [1] Trude, Sally. Patient Cost Sharing: How much is too much? (2003, December). Retrieved from: http://www.hschange.com/CONTENT/630/ 

  [2] The World Bank. Health Expenditure, total % of GDP(2016). Retrieved from:   http://data.worldbank.org/indicator/SH.XPD.TOTL.ZS

  [3] HealthCare.gov. Cost Sharing. (2016). Retrieved from: https://www.healthcare.gov/glossary/cost-sharing/

  [4] Patient Cost-Sharing in Marketplace Plans (2016). Retrieved from: http://kff.org/health-costs/issue-brief/patient-cost-sharing-in-marketplace-plans-2016/

Student Blog Disclaimer
  • The views expressed on the Student Blog are the author’s opinions and don’t necessarily represent the Penn Wharton Public Policy Initiative’s strategies, recommendations, or opinions.

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