Copay, Meet COVID: Could This Be the End of “Skin in the Game”?

The COVID pandemic crisis will produce changes in healthcare delivery, and there is a good chance some of these can be lasting improvements.  One change so far is how collection of copayments has lapsed, at least temporarily, for some service encounters.  Could this foretell their end?

Copays evolved from the concept of coinsurance, and became especially widespread in the 1990’s.  Unlike coinsurance, an out-of-pocket (OOP) payment that is a percentage of the bill, copayments are a fixed, flat fee per transaction.  Typically, they don’t count to OOP maximums, although coinsurance does.  They might seem like a uniquely US American invention, yet they have a noteworthy history in Germany, too.  Considering the small dollar amounts of individual copayments, it is difficult to understand why they persist.  But like baggage fees for airlines, there they are, presumably cherished as a revenue stream within privatized US American healthcare. 

The onslaught of pandemic demands has stretched the healthcare system in ways where inherent weaknesses can no longer be glossed over.   Copays have fallen by the wayside in some areas, like primary care and behavioral health.  Collecting copays adds another layer of complexity to telehealth encounters, where it makes more sense to avoid them anyhow.  But restricting waivers to a single condition or type of service is risky slope, and invites mis-coding or gaming in order to avoid the requirement.

The most noxious assumption behind copays is typified by the expression that they are “skin in the game”.   Surviving the era of managed care meant having to hear this expression time and again. It always seem liked a pejorative phrase, implying that the need healthcare was somehow a selfish pursuit.

Stripping away whatever sentiment this expression evokes, the core issue is the concept of moral hazard.  Copays supposedly prevent moral hazard in the form of unnecessary or frivolous healthcare utilization.  Putting aside the notion that there is anything pleasurable that copays prevent, one might accept that they are better than alternative mechanisms, such as blatant rationing. 

If moral hazard is a problem, are copayments really a worthwhile device in the toolkit for preventing it? Evidence from Germany, suggested they are ineffective at demand management.

Maybe copayments work well in the prescription drug market, steering patients towards equivalent, lower-cost alternatives.  And there could be a case for using them to drive demand for evidence-based interventions (e.g. surgery vs. physical therapy).   It appears more problems arise once they are applied around primary care services.  Diagnostic needs could be another field where copayments make relatively less sense than cents.

In sum, copayments frequently seem like an unnecessary administrative burden for a small amount of money.  Not infrequently, I’ve received small-dollar refund checks after clinic administrators correct wrongly collected copayments.  It seems like a waste of administrative resources to sort out these one- and two-digit sums, considering how many patients have five-digit annual premium bills.  When I’ve used healthcare services in Canada, and in the UK, one of the most pleasing features was the utter absence of paperwork.  I appreciated being able to show up and not pay on the spot.  And clinicians could focus exclusively on careful assessment and treatment.  COVID-19 is a revolutionary event.  It is a good time for payors to shake themselves of the trouble of copyaments, and take the fight against moral hazard to a different battleground.

-Published July 6, 2020

Employer-Sponsored Healthcare Coverage & the Opioid Crisis

Chase, D.  (2018) The Opioid Crisis Wake-Up Call: Health Care is Stealing the American Dream. Here’s How We Take it Back.  Health Rosetta Media.

The Opioid Crisis Wake-Up Call has an inaccurate title.  This book is about how to improve employee-sponsored health coverage in the USA, seemingly for an audience of corporate benefits design specialists.  There are infrequent linkages to the crisis of opioid dependence.  On the whole, it reads like a loosely-edited volume composed by the author alongside various contributors.

The COVID-19 pandemic made much of the content obsolete.  And if you’re not a huge fan of saddling employers with health policy responsibilities, the book is probably not worth your time.  Other countries provide better quality healthcare at far lower costs by relying even more heavily on public financing than the USA does.  Their pricing models are not so prone to the examples of provider / insurer exploitation pointed out in this book. The author is at least attempting to patch up this situation.  For actual recommendations on how to answer the opioid wake-up call, the PROP (Physicians for Responsible Opioid Prescribing) website might be a good place to start.  Or, Sam Quinones’ excellent 2016 book, Dreamland, which Chase references, gives a definitive perspective on how opioid dependence was fostered by medical and marketing professionals.

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The ‘Healthcare Premium is Too Damn High’ Party

New Yorkers might remember Jimmy McMillan when he ran for governor as a candidate from the Rent Is Too Damn High political party.  Maybe it is time to create the Healthcare Premium Is Too Damn High political party.  Arguing over Medicare funding or “socialism” either bores or scares voters into clinging onto a failed healthcare system in the USA.  What most needs to be highlighted, but seems actively obscured from public view, is a simple question: cost.   Why are USAmericans willing to pay so much for their healthcare?

For decades, there’s been finger-pointing at  the wrong culprits. The premise of private insurance companies was that if beneficiaries had “skin in the game”, costs would go down.  Instead, this spawned punitive deductibles and complex co-payment systems.  In parts, these were begrudgingly accepted yet these tactics are clearly not solving the cost problem.  People pay more, in order to subsidize inefficient commercial models.

Drew Altman, recently writing for Axios, punctures the value proposition behind self-insured coverage.  In theory, employers who are footing the bills, and merely engage insurance companies as administrators, should be better able to contain costs.  But in practice, their coverage is as costly as traditional fully-insured contracts.

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