The principal purpose of insurance is to protect the insured against the consequences of major illness or accident. Small losses are more efficiently treated on an out-of-pocket basis. Deductibles tend to prevent small losses from becoming claims. Since the cost of administering a small claim is very nearly that of a large one, deductible provisions use more of the premium dollar for serious medical problems. Coinsurance provides a continuing economic incentive to the insured to control the price and extent of facilities and services utilized. Additionally, both deductibles and coinsurance act as underwriting safeguards reducing the potential for abuse of the program. Second, cost sharing helps to promote efficient use of medical services. Insurance has the effect of making medical care seem less costly to the consumer, who therefore has an incentive both to purchase more medical care than if unprotected and to choose more costly forms of treatment. Moreover, since group insurance is the predominant form of coverage, with premiums paid in large part or fully by employers, the employeeconsumer has even less incentive for economy. Numerous recent studies have dealt with the effect of deductibles, coinsurance and copayments on the use of various forms of health care services.3 The consensus of these studies indicates a direct relationship between the presence of cost-sharing devices and a decrease in the utilization of various health care services. A Social Security Administration study indicates that with the introduction of a 25% coinsurance provision, use of physicians' services declined 24.1%.4 Another study by the Rand Corporation estimated that the establishment of a full-coverage national health insurance program would increase the present demand for ambulatory physician services by 75% whereas including a 25% coinsurance factor would cause only a 30% increase.5 One of the fundamental truths about medical care resources is that the supply is limited. Demand for such services, however, is potentially unlimited. Indeed, demand may take the form of seeking treatment when there is no medical basis for it. This is borne out by the experience of the prepaid group health plans where there has been clear evidence that the "worried well" overutilize health services to the detriment of those needing care. Critics of cost sharing cite two major reasons for their opposition. One, it discourages necessary care. Proponents of first-dollar coverage argue that any degree of cost sharing deters patients from seeking preventive services or early treatment for serious symptoms. However, there is no conclusive evidence that deductibles, coinsurance or copayments have a deterrent effect on needed care. For that matter, there is no clear definition of "needed care" or even how to measure it. Moreover, since cost-sharing arrangements are flexible, any possibility of discouraging the use of certain socially desirable benefits, such as preventive or well-baby care, could be minimized by exempting them from required cost participation. And, of course, any national program would require little or no participation in the cost of medical services by families in the lower income groups. Second, critics describe cost sharing as complex and costly. They argue that it creates complex payment schedules, which are confusing to the public, whereas full coverage plans simply require the patient to submit a claim. While this may be true of some portion of the population, and, indeed, of some cost-sharing arrangements, this argument greatly underestimates the sophistication of the vast majority of the public. Most people seem perfectly capable of totaling their bills to submit a claim. Full coverage advocates point out that income-related cost-sharing arrangements require adminstrative mechanisms for gathering income data; therefore, the savings that accrue would be offset by overhead expense. To counteract this effect, it is proposed that (1) the deductible be uniform for all individuals, and (2) a limit be set on total copayments, scaled to income. A relatively small proportion of the total insured population would exceed the limits on aggregate deductibles and copayments, and only for this group would information on income be needed. At the same time, such an arrangement would meet the overall objective of relating the insured individual's financial responsibility to ability to pay. Conclusion Although there are some disadvantages to cost-sharing features, on balance patient participation is a desirable means of assuring consumer responsibility, reducing costs, and fostering wise use and allocation of limited health care resources. References 1. S.R. Garfield, "Prevention of Dissipation of Health Care Services Resources." American Journal of Public Health 61:1499, 1971. 2. United States Department of Health, Education, and Welfare, Social Security Administration, Office of Research and Statistics, Social Security Programs Throughout the World, 1973, December 1973, p. xix. 3. Anne A. Scitovsky and Nelda M. Snyder, "Effect of Coinsurance on Use of Physician Services," Social Security Bulletin, vol. 35 (June 1972), pp. 3-19; Charles E. Phelps and Joseph P. Newhouse, “Effect of Coinsurance: A Multivariate Analysis,” ibid., pp. 20-28; and Robert S. Kaplan and Lester B. Lave, "Patient Incentives and Hospital Insurance," Health Services Research, vol. 6 (Winter 1971) pp. 288-300. 4. Scitovsky, "Effect of Coinsurance...," op. cit. 5. Charles E. Phelps, Joseph P. Newhouse, and William B. Schwartz, "Policy Options and the Impact of National Health Insurance," The New England Journal of Medicine, vol. 290, 1974, pp. 1345-1359. VIII. HEALTH IMPROVEMENT THROUGH The preceding chapters have emphasized the delivery and financing issues. involved in the current health care system. Yet there are broad influences affecting health that are beyond the scope of medical care and health insurance, including shelter, nutrition, sanitation, our total living environment, and life styles. One major non-medical determinant of health is the degree to which people assume a responsibility for their own well-being. The reality is that most causes of death and disability can be affected and even prevented by individual behavior. As the health economist Victor Fuchs has observed: "A great deal of what has been written recently about the 'right to health' is very misleading. It suggests that society has a supply of 'health' stored away which it can give to individuals and that it is only the niggardliness of the Administration or the ineptness of Congress or the selfishness of physicians that prevents this from happening. Such a view ignores the truth of Douglas Colman's observation that ‘positive health is not something that one human can hand to or require of another. Positive health can be achieved only through intelligent effort on the part of each individual. . .' "The notion that we can spend our way to better health is a vast oversimplification. At present there is very little that medical care can do for a lung that has been overinflated by smoking, or for a liver that has been scarred by too much alcohol, or for a skull that has been crushed in a motor accident." 1 In addition, the right of access to health care has little meaning unless citizens have some knowledge of available services and facilities, act upon this knowledge, and follow the prescribed regimen. Health education can serve as the vehicle to provide the needed counseling to individuals and their families, with particular stress on all aspects of preventive care and health maintenance. There is, therefore, a growing consensus in the United States that health education for the public should be a high national health priority. Health education has the potential for keeping people well, lowering health care costs, and reducing work days lost through illness. Effective health education benefits not only the medical care consumer, but providers and insurers as well, by enhancing the capacity to utilize medical services effectively, and to make informed choices among alternative means of delivery. The Private Health Insurer Response In the late 1960s, the health insurance business undertook an extensive examination; first, to define problem areas within the health care system, and, second, to exert influence to create soundly conceived and responsive solutions to meet the needs of all Americans. This assessment resulted in a report prepared by the Health Insurance Association of America entitled "Health Care Delivery in the 1970s" which contained a series of major recommendations, one of which reads as follows: "That the Association and member companies take necessary It was recognized that health education is a broad and complex field, requiring more than an independent effort on the industry's part. Accordingly, in 1971, the insurance business welcomed the opportunity to help fund the work of the President's Committee on Health Education. In addition, two insurance company senior executives served as members of the President's Committee, and other insurance representatives contributed staff time to the deliberations. A major recommendation of the President's Committee called for the creation of a private, nonprofit, free standing National Center for Health Education to stimulate, coordinate, and evaluate health education programs within the private sector, as well as to conduct and spur research designed to find ways to motivate people to practice good health habits. ness, With the further financial assistance of the private health insurance busithe National Center for Health Education came into being in 1975. The Center is viewed as a valuable mechanism for strengthening the health education efforts of the private sector which to date have been sporadic and uneven, and hence insurers stand ready to continue to work with this enterprise. Priority attention by the Center is focusing on three program areas: 1. Health education in the workplace, 2. 3. Health education implications of the Health Planning and Patient education in ambulatory care and in-patient settings. In addition to these developments, the Department of Health, Education, and Welfare had earlier created a Bureau of Health Education which, in effect, serves as a counterpart within government of the private National Center for Health Education. In testimony before a Congressional unit, the HIAA reiterated its support of the National Center for Health Education and proposed as a "Federal focal point" a Presidentially appointed "inter-departmental council on health education" having close liaison with the National Center. The HIAA suggested that the Center "could encompass in its programming contractual assignments from the Federal inter-departmental council on a variety of topics." Individual Insurance Company Initiatives A number of insurance companies conduct health education activities directed at encouraging better health practices by their employees and policyholders. For example, in the preventive area, companies undertake drug prevention programs, distribute health literature, undertake disease screening programs, promote highway safety, and other activities of this type. They also make substantial contributions to voluntary health agencies engaged in public education programs, and on a personal basis many company 70-411 O 76 pt. 3 42 |