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The European Journal of Health Economics
Published in: The European Journal of Health Economics 1/2012

01-02-2012 | Editorial

Is it time to reconsider the role of patient co-payments for pharmaceuticals in Europe?

Authors: Michael Drummond, Adrian Towse

Published in: The European Journal of Health Economics | Issue 1/2012

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Excerpt

There are two general purposes of co-payments in health insurance systems, whether public or private. The first is to deal with the problem of moral hazard. Economic theory [1] tells us that to be efficient, health insurance cannot offer 100% coverage, so reducing the marginal cost faced by the patient to zero. The patient and their agent (the doctor) will consume health care until there is zero benefit, i.e. want all care that is effective irrespective of cost. Chalkley and Robinson [2] refer to this as the micro-efficiency challenge. Spreading risk has to be balanced by some co-payment.1 The second purpose is revenue raising, which can be thought of as seeking to reduce the cost to the third-party payer2 not by cutting use but by raising offsetting funds. Patients get the health care but the burden on the insurer is lower. …
Footnotes
1
We use the term co-payment and co-insurance interchangeably. They are both patient payments that reduce the coverage provided by the third-party payer.
 
2
The term “macro-efficiency” is used for the related, but separate, issue of whether overall health system expenditure growth is reduced by cost sharing.
 
3
Barer et al. [6] also argue that whilst co-payments may have some temporary effect of reducing costs to the third-party payer, over time co-payments will increase overall costs and hence income to producers. In their later review they point out that the design of the RAND study as an experiment meant it was not able to assess the impact on the health system over time of higher co-payments. They anticipate that suppliers would change behaviour in order to maintain incomes in the face of any fall in income arising from a fall in utilisation. Any macro-efficiency effect would be short term in duration.
 
4
We can note that Pauly and Blavin [16] have argued that VBID (and value-based cost sharing more generally) is consistent with the conventional moral hazard approach to using co-payments. Theory already suggests that co-payments should discriminate between disease areas and patients [1]. However, Pauly and Blavin are in effect recognising that co-payments have no role in improving efficiency if patients are not well informed and are not driving decision-making, i.e. the payer is more knowledgeable about incremental costs and benefits than the patient and is able to provide or deny treatment.
 
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2.
Chalkley, M., Robinson, R.: Theory and Evidence on Cost Sharing in Health Care: An Economic Perspective. Office of Health Economics, London (1997)
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Manning, W.G., Newhouse, J.P., Duan, N., et al.: Health Insurance and the Demand for Medical Care. The RAND Corporation, Santa Monica, CA (1988)
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Rubin, R.J., Mendelson, D.N.: A framework for cost sharing policy analysis. In: Mattison, N. (ed.) Sharing the costs of health: a multi-country perspective. Pharmaceutical Partners for Better Healthcare, Basel (1995)
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Gerdtham, U.-G., Johanneson, M.: The impact of user charges on the consumption of drugs. Empirical evidence and economic implications. PharmacoEconomics 9(6), 478–483 (1996)PubMedCrossRef
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Barer, M.L., Evans, R.G., Stoddart, G.L.: User Charges, Snares and Delusions: Another Look at the Literature. The Premier’s Council on Health, Well-being and Social Justice, Ontario (1994)
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Metadata
Title
Is it time to reconsider the role of patient co-payments for pharmaceuticals in Europe?
Authors
Michael Drummond
Adrian Towse
Publication date
01-02-2012
Publisher
Springer-Verlag
Published in
The European Journal of Health Economics / Issue 1/2012
Print ISSN: 1618-7598
Electronic ISSN: 1618-7601
DOI
https://doi.org/10.1007/s10198-011-0353-8

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