A research paper shows that cost-sharing reduces the use of prescription drugs and helps cut down on physician office visits by the elderly.
“Patient Cost-Sharing and Hospitalization Offsets in the Elderly,” co-authored by Harvard Kennedy School professors Amitabh Chandra, Jonathan Gruber and Robin McKnight, was published in the March 2010 edition of American Economic Review.
The authors examined impacts from policy changes recently enacted by the California Public Employees Retirement System (CalPERS) Board in an effort to control healthcare costs. They found that the reduction was accompanied by greater hospitalization for elderly patients who suffered from a chronic disease.
“Overall, we found a rather modest offsetting rise in hospital care when physician and prescription drug co-payments are raised. But we find substantial offsets for the sickest populations with chronic diseases, suggesting that, for chronically ill populations, there is little financial gain from higher co-payments,” the paper said.
The authors say their findings may help policymakers as they consider more effective ways to limit healthcare costs through co-pays and other similar strategies.
“Our analysis has important implications for the ‘donut hole’ in the Medicare Part D program – beneficiaries with chronic illnesses who are exposed to 100 percent cost-sharing may cut back on vital therapies and end up increasing overall costs for the Medicare program,” said Chandra. “It also illustrates the pitfalls of having different insurers being responsible for different aspects of a patients care.”