JANUARY 2006 HOT TOPICS

Cutting Drug Co-payments for Sicker Patients Could Save a Billion Dollars Every Year

With costs for prescription drugs at an all-time high, both government and private insurers are looking for ways to cut drug costs without negatively impacting health. RAND investigated one promising approach: varying each person's co-payment according to medical risk. High-risk, sicker patients would pay nothing for their medications; low-risk patients would pay more. RAND found that eliminating co-payments for high-risk patients would improve compliance with medication recommendations, reduce hospitalizations and emergency room visits, and save about $1 billion in overall medical costs each year.

Initially, the savings would be realized by payors. Ultimately, however, the savings could be passed along to consumers in the form of lower premiums (or premiums that rise at a slower rate than they would otherwise).

RAND's study focused on one type of medication: cholesterol-lowering drugs. Researchers cautioned that risk-based co-payments cannot be used for every type of medication, and that a number of obstacles would need to be overcome. However, with appropriate benefit design, risk-based co-payments could likely be used for a number of other medications (such as drugs for controlling asthma and diabetes), thereby improving patients' heath and achieving even greater overall savings.

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Helping Military Personnel Understand and Value Their Health Care Benefits

Military personnel and their families are automatically covered by TRICARE, a comprehensive health care plan that offers excellent benefits. TRICARE requires a substantial government investment and is a basic part of the nation's commitment to its military. However, because military personnel rarely receive information on the costs of buying comparable coverage in the private sector, they may not fully appreciate the value of the TRICARE plan.

RAND researchers have analyzed health care claims data to find out what corporate employees pay for comparable coverage in the private sector. Claims data were taken from Fortune 500 companies and are therefore conservative. (Large companies usually have more bargaining power and therefore lower costs than smaller companies.) Even using conservative data, RAND found that, at the median, a healthy single person would spend about $1,000 more per year for comparable coverage in the private sector; a family would spend about $3,000 more per year.

Given the financial importance of military health care benefits, how can their value be best communicated to military personnel? Recommendations include better media coverage, obtained through press releases and sponsored reports; providing comparative information in descriptive inserts in military paychecks; and setting up interactive, computer-based tools to provide regularly updated information about the dollar cost of private health insurance premiums and out-of-pocket costs.

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Parents Report that Quality Primary Care Requires More Than Insurance

Recognizing the importance of high-quality primary care as a cornerstone of the nation's efforts to improve children's heath, Congress has passed a variety of public health insurance programs, including SCHIP (State Children's Health Insurance Program). A new RAND study reveals that financial access—through insurance—is only one aspect of good primary care. Even more important are potential access (the child has a regular provider of medical care) and realized access (the child actually receives care when it is needed).

RAND analyzed data on primary care from parents of a wide range of elementary school children, including minority and non-English-speaking children. The data measured parents' experiences with primary care, including how well the doctor understood the child's needs, communicated with parents, provided comprehensive care, and coordinated care when necessary. While financial access was clearly important, potential and realized access had an even greater effect on the quality of children's primary care.

The study suggests that policies designed to enhance potential and realized access could significantly benefit children's health. For example, health plans could improve potential access through open panels (so new enrollees would not have to change their existing providers). If new enrollees have no regular provider, the plan could set up an active program to link enrollees with appropriate providers. Realized access could be improved through strategies such as nurse-staffed help lines and extended hours for office and urgent care.

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