User Charges Flashcards
What is a User Charge?
Charging patients for health services
User charges for health care consist, on average, of a much larger share of the income of lower-income people. (Evans 2000)
Why UC
Reduce excess demand caused by full insurance (moral hazard)
Makes providers more judicious
Cost constraint
Direct people to more cost-effective use
raise revenue
Decreases concerns for efficiency (over-utilisation)
*very different effects depending on the overall system, depends on how providers are reimbursed or what other mechanisms are in place
User charges example
NHS
User charges in the NHS generate around £1bn a year, equivalent to about 1% of the NHS budget in 2009-10
Prescription charges
- Patients pay £7.20 for each prescription (73% of the average prescription cost in 2008)5 or £104 for a 12-month prepayment certificate or £28.25 for 3 months
- Exemptions for children, older people, people on low incomes, and those with certain medical conditions mean that only 11.4% of prescriptions are charged for
Dental charges
- The maximum copayment for a complex course of treatment at an NHS dental practice is £198; most courses of treatment require copayments of £16.50 or £45.60
- Children, people on low incomes, and women who are pregnant or have had a baby within a year are exempt
Despite these exemptions, NHS charges create financial barriers to access, particularly among poorer people and people with chronic conditions. Half of the Citizens’ Advice Bureau clients surveyed in England and Wales in 2000 reported difficulties in affording NHS prescription charges, and over a quarter failed to get all or part of a prescription dispensed during the previous year because of the cost
(Thompson et al. 2010)
User Charges and Efficiency
Two arguments for expanding the role of user charges in the NHS might be made, both relating to the potential to get better value from the resources available.
- The first argument is that user charges can help make up for shortfalls in public funding. This is an efficiency argument because the implicit claim is that in the current economic climate, social welfare will be enhanced by substituting patient payments for tax financing. There is no theory of fairness in tax policy that permits targeting the ill in this way, and we will not consider this argument further.
- The second argument is that user charges make people more discerning in their healthcare choices. When health care is free at the point of use, patients seek care for as long as there is some benefit to be had—however small, and irrespective of its cost. Imposing a charge will encourage people to avoid care that is low value or not cost effective (costs more to provide than the benefit produced is worth), freeing up resources to provide more high-value care. As a result, the amount of health the healthcare system produces will grow relative to the resources available.
Research shows that although people do reduce their use of health care when faced with a charge, they are unable to distinguish low-value from high-value care. The strongest evidence for this comes from the respected RAND Health Insurance Experiment, a large randomised controlled trial carried out in the United States in the 1970s and early 1980s. The RAND study found that people across income groups who faced a user charge reduced the use of effective care almost to the same degree as they reduced the use of ineffective care. This important finding has been reinforced by subsequent studies based on natural experiments. (Aron-dine et al. 2013)
Other research shows how user charges can contribute to avoidable increases in healthcare costs over time. Introducing user charges in one area of care—for example, outpatient prescription drugs—can have a squeezed balloon effect, initially lowering expenditure on drugs but increasing the use of other services such as half day or full day admissions to community mental health centres, nursing home admissions, and emergency care. This is because people may forgo necessary treatment, fail to adhere to treatment, or opt for free (but expensive to provide) care to avoid paying user charges. Total spending can increase if patients present in high cost settings with conditions that could and should have been treated (more cheaply) much earlier on. (Thompson et al. 2010)
User Charges implications
Access is based on willingness to pay rather than healthcare
demand and supply are not independent of each other in healthcare
Information asymmetry (patient vs provider)
People can not distinguish high value and low value in healthcare services
Types of User Charges
- Direct: the patient is paying a specific amount, with the insurer paying the remainder
- Co-payment: the user pays a fixed fee (flat rate) per item or service
- Co-insurance: the user pays a fixed proportion of the total cost, with the insurer paying the remaining proportion
- Deductible: maximum amounts that the insured has to pay before insurance becomes effective, deductibles can apply to specific cases or to a period of time
User charges protection schemes
Annual caps/ceiling on spending: the most an individual is required to pay OOP each year (serves as a safety net, assuring that once this maximum amount is paid, health insurance pays 100% of all covered services for the. balance of the year)
Exemptions: for people or products/services, chronic conditions, elderly, income-related, service categories
Reduced rates and discounts for pre-payments
Tax relief?
Complementary private health insurance (France and Canada)
Substitution of treatment by doctors or pharmacists
User charges vs Efficiency
Arguments for User Charges (Economic Efficiency)
- Allocative Efficiency: Ideally, resources are allocated based on willingness to pay, preventing waste. User charges introduce a price, potentially reducing unnecessary healthcare use.
- Reduced Costs: User charges might deter some from seeking unnecessary care, potentially containing healthcare costs.
- Revenue Generation: In low-income countries, user charges could raise funds for essential healthcare supplies.
Criticisms of User Charges
- Inequity: User charges can disproportionately burden the poor who may forego needed care. Ideally, user charges wouldn’t affect access based on the ability to pay. Rand study (manning et al. 1987) - Reduce use but mainly in low-income groups, which are more likely to have a higher need.
Reduced Access to Care: Due to user charges, people might avoid seeking necessary care, potentially harming their health. Squeeze-ballon effect - you squeeze protection on GP and lower demand on primary care, which will blow in other sectors, mainly emergency and hospital services
- Misinformation: Patients may not have the knowledge to make informed choices about forgoing care due to charges.
- Substitution of Care: People might avoid user charges by using alternative, potentially more expensive, forms of care.
- Third-Party Payer Budgets: The main reason for user charges might be to shift costs to patients and reduce healthcare budgets, not necessarily improve efficiency.
Example US Health System
Value-based UC: more intelligent design, they apply UC selectively
In the US, value-based approaches have emerged in the past 15 years against the backdrop of widely applied and rapidly rising UC, which have failed to stem the growth in healthcare spending or enhance efficiency in the use of health services.
Insurers offer enrollees reduced UC for drug prescriptions for specified conditions (asthma, diabetes, hypertension), and specific groups of drugs
Gemmill et al. (2008) argue that user charges for prescription drugs are not an effective way to improve healthcare efficiency.
Limited Cost Savings: User charges don’t significantly reduce overall prescription drug costs. They may just shift costs from insurers to patients.
Inequity: User charges disproportionately burden lower-income people who may forego needed medication.
Potential for Increased Costs: Charges may lead people to avoid preventive care or seek more expensive alternatives, raising overall healthcare costs.
Reduced Adherence: User charges can decrease adherence to essential medications, potentially harming health outcomes.
Alternative strategies to improve efficiency:
Promote Lower-Cost Alternatives: Encourage patients to choose generic drugs or medications with lower costs.
Protect Vulnerable Populations: Implement programs to shield low-income people and those who rely heavily on medications from the financial burden of user charges.
Target Other Players: Focus on controlling costs by influencing pharmaceutical companies, doctors, and pharmacists who make decisions about drug prescribing and pricing.
Value-based UC
Direct UC is a form of co-payment
Multi-tier formularies - multiple drugs for different prices (mostly used in the US)
two or three tiers
1. generic drugs, lowest co-payment
2 and 3. brand name drugs, which can split into preferred and non-preferred drugs
UC in LMICs
Lagarde & Palmer 2011
Evaluated the effect of introducing UC, removing fees and increasing or decreasing charges in 12 different countries.
Varied depending on the type of services and the level and nature of payment
UC introduced or increased:
- preventive healthcare services utilisation decreased
- curative services utilisation decreased
- When quality improvements were made at the same time as UC was introduced, curative utilisation increased, and lower income groups began to use health care services more
When UC was introduced with quality improvement mechanisms, and patients were aware, it usually increased the use of care.
