Lowering Drug Co-pays Could Result in Savings for Employers

As 2008 begins, millions of Americans are having to dig deeper into their own pockets every time they refill a prescription or see a doctor.

Higher co-payments that took effect Jan. 1, as employers try to deal with the rising cost of health insurance by making employees and retirees pay more. However, a new study finds that instead of going up, co-pays should go down -- at least for some people taking some drugs.

Just by cutting a few dollars off the co-pay, the study suggests, employers could increase the chances that employees with chronic illnesses will take certain preventive medicines. And that could pay off in the long run, in the form of fewer hospitalizations or emergency room visits for employees with diabetes, high blood pressure, asthma and other conditions.

Specifically, the researchers said their findings indicate that a major private employer significantly increased the use of important preventive medicines among its employees by automatically making some medications free, and slashing co-pays for other drugs by 50 percent. Meanwhile, another employer that kept its co-pays the same didn’t experience the same increase in use of preventive medicines.

The difference in medication use between chronically ill employees at the two companies was sizable -- even though all the employees in the study were also enrolled in special programs designed to help them take control of their diseases.

The study is published in the January/February issue of the journal Health Affairs by a team led by University of Michigan and Harvard University researchers. It is the first rigorous, controlled trial of a concept called "value based insurance design," the researchers said.

That concept, introduced in the late 1990s by members of the research team, is based on the idea that there should be few barriers standing between a chronically ill person and the medications that can keep them well enough to work and to avoid health crises and complications related to their disease. Even a barrier of a few dollars is enough to keep people from using the medicines they need the most.

"All research to this point has shown that individuals will not buy important medical services even if there’s a small financial barrier: $5 or even $2," said senior author Mark Fendrick, M.D., of the U-M Medical School and School of Public Health. "This study showed that when you remove those barriers, people started using these high-value services significantly more. These results bolster the idea that health insurance benefits should be designed in ways that produce the most health per dollar spent."

Fendrick and first author Michael Chernew, Ph.D., of the Harvard Medical School, co-founded the Center for Value-Based Insurance Design, based at U-M. They conducted the study with co-authors from ActiveHealth Management, which had been retained by both companies in the study to provide voluntary disease-management programs for employees and dependents with 32 medical conditions.

For more information on the Center for Value-Based Insurance Design, visit www.vbidcenter.org.

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