Cutting Drug Copayments for Sicker Patients Can Cut Hospitalizations and Save Money

For Release

January 11, 2006

Cutting drug copayments for people taking cholesterol-lowering medication can keep them healthier and save more than $1 billion a year in medical costs in the United States, according to a RAND Corporation study issued today.

The study found that when cholesterol-lowering drugs cost less, patients are more likely to take the prescribed medication. As a result, many people have fewer health problems and are hospitalized less often.

Researchers based their findings on estimates that about 6.3 million U.S. adults with private insurance or Medicare coverage take cholesterol-lowering medication. The study says cutting copayments to make the drugs cheaper for the sickest patients would avert nearly 80,000 hospitalizations and more than 31,000 emergency room visits each year – accounting for the more than $1 billion in savings.

RAND Health simulated the impact of a variable copayment plan by analyzing information from 88 health insurance plans that served more than 62,000 patients who began taking cholesterol-lowering drugs between 1997 and 2001.

“Reducing drug copayments for the sickest patients taking certain drugs can be a way to both improve patient care and hold down rising costs,” said Dana Goldman, director of health economics at RAND Health and lead author of the study. “There are obstacles to these policies, but our research suggests they should receive wider consideration.”

While the research looked only at cholesterol drugs, it seems likely that lowering patient copayments for other drugs for other chronic illnesses could also prompt more patients to take those prescribed medications – thereby lowering medical costs in the United States even further, Goldman said. Additional research is needed to confirm this, Goldman said.

Cholesterol-lowering drugs were a good type of medication to use for the study because risks for coronary artery disease and cholesterol levels are easily monitored. Variable copayments are not likely to be useful where expensive tests or medical procedures are needed to monitor a condition, according to the study.

The findings are published in the January edition of the American Journal of Managed Care.

Researchers examined the association between the size of drug copayments and whether patients followed doctor's orders to take needed drugs one year after the patients were first prescribed cholesterol-lowering medication.

The study found that patients who had $10 per month copayments for their cholesterol-lowering medication were 6 to 10 percent more likely to fully comply with doctors' orders to take the drugs than patients who had $20 per month copayments. High-risk patients were less likely to be influenced by higher costs.

In addition, researchers analyzed the link between patients' drug compliance and their use of medical services for up to four years after starting cholesterol-lowering therapy. The researchers found that patients who were more compliant in taking their medication had lower hospitalization rates and emergency room use, particularly patients who had a higher risk profile.

Using these findings, researchers simulated the impact of a policy that eliminated copayments for both high-risk and medium-risk patients, but raised monthly copayments required for low-risk patients from $10 to $22.

While the approach appears promising, researchers warn that there are some potential problems their study did not resolve. For example, health plans with lower drug copayments for high-risk and medium-risk patients may attract higher numbers of sick patients, while discouraging healthier patients who may perceive they are penalized by being charged higher copayments.

If insurance plans pursue such approaches, they may want to use some of the cost savings to also lower copayments for healthy patients or to create some type of incentives for healthy patients who closely follow drug regimes.

“We don't want to penalize people for being healthy,” said Geoffrey Joyce, a RAND economist and study co-author. “The goal is to encourage people to be healthier -- both by taking their medicine and following healthier lifestyles overall.”

Researchers say their findings reflect reports from some companies that have experimented with lowering or eliminating copayments for some critical drugs.

For example, the Pitney Bowes company lowered cost-sharing for diabetes and asthma medications, two chronic health conditions that require ongoing care. The change prompted a 12 percent cut in health care costs among the affected workers, due primarily to fewer emergency room visits and hospital admissions.

The other author of the study is Pinar Karaca-Mandic of RAND.

Support for the study was provided by the National Institute on Aging through the RAND Roybal Center for Health Policy Simulation and the UCLA Claude D. Pepper Older Americans Independence Center.

RAND Health is the nation's largest independent health policy research program, with a broad research portfolio that focuses on health care quality, costs and delivery, among other topics.

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