Eight - No, Make that Nine - Reasons Drug Co-Payments Make No Sense

Recently I met with a Member of Parliament to discuss my project Faces of Pharmacare. We had a wide ranging and very engaged discussion about Pharmacare. It was seriously refreshing!

At one point I said something to the effect of “you realize that cost-sharing for drugs is a tax on the sick?” The comment just hung in the air like the smell of a wet dog.

Undeterred, I continued, “I’ll tell you why user fees for drugs make no sense.”

1. They’re a Tax on the Sick

The only people that will fill a prescription are those who have long-term chronic conditions, risk factors for certain diseases or are dealing with an ailment which will go away in short order (no, filling a prescription for someone else doesn’t count). Since the truly healthy rarely need fill a prescription they are never subjected to paying out-of-pocket.

When you really think about it, cost-sharing, deductibles, co-payments, etc. are discriminatory taxes on the sick.

And, the sicker you are, the more tax you pay!

2. The Sick Subsidize the Healthy

“It seems to me that the way the system works in Canada means it’s the sick supporting the healthy” — Judy D., one of the Faces of Pharmacare

If the sick are the ones paying this tax, that means they will pay a larger share of overall drug costs. Dig deeper and you realize that because they take on a larger share, the sick are effectively subsidizing the healthy. How?

Co-payments are one of the “tools” used by insurance companies during group insurance negotiations. They will decrease annual individual premiums if the plan administrator agrees to add, modify or increase co-payments. So, co-payments keep the cost of private drug plans down and similarly reduce the general tax burden for the healthy.

It also means that it’s the sick who pay for much of the monstrous profit of the private insurance companies — either through these co-payments or being denied coverage altogether because of a preexisting condition (which allows drug companies to insure only the healthy while discriminating against the sick).

The system will be there when a healthy person needs it in part because the sick pay to keep it there for them.

3. No, They Don’t Reduce Overuse!

Economists call this — rather cynically — ‘moral hazard.’ That’s the tendency for people to use too much of something simply because it is free.

Hmmm. Try this thought exercise:

Imagine you are in front of an good-sized friendly audience all seated at an event. You ask everyone to stand, look around and meet their neighbours. Now you ask everyone who has diabetes (type 1 or 2) to take a seat. Thank them all. Then uncover the syringes and vials of insulin you have on the table and ask those who are still standing if they would like an injection. It’s free!

What, no takers?

That’s the core of why the concept of moral hazard in prescription drugs is ridiculous. Except for special cases like opioids or other psychotropic drugs, no-one in their right mind wants to take a drug for something they don’t have.

User fees started to really gain traction in the 1970s when Joe Newhouse led a study at RAND in the US on user fees for doctors visits (not drugs — mind you — physician visits. The difference is crucial). His research showed quite clearly that they did indeed reduce utilization. The problem was that this was most noticeable amongst the poor and the sick-poor, groups of people who are more likely to need access to a doctor and least likely to be able to afford it.

It seems like this was all the insurance industry needed to adopt them broadly for absolutely everything in their portfolios. Advertised as a way to prevent abuse, it was really just about decreasing costs and increasing profits.

Each of us are ultimately the ones who make the decision to visit or not visit our doctor but we cannot simply decide to get and fill a prescription on a whim. FIRST, we must get a script from our doctor. So, if your doctor has recommended a treatment, and we’re taught to trust our doctors’ judgement, why do we add additional barriers to treatment?

4. But They DO Create Absurd Incentives

So, we know that user fees reduce utilization among the poor and sick. When people can’t afford their drugs or co-payments they do crazy irrational things like buy food instead. Or buy clothes for their kids. Or skip doses. Or cut their meds in half. Or not buy them at all. And just live with their disease and symptoms.

What happens when people with chronic illness can’t get or don’t take their treatment? Well, they get worse. They have exacerbations. They can’t do things they are accustomed to. They end up in ER. They end up in hospital. Sometimes they die.

Which do you think is more expensive? The proper medications in the first place or a trip to the ER or hospital?

And when people are sick, it also means they cannot contribute to the economy fully, if at all. If they live, they often get depressed. They can also get other related illnesses. They become a greater burden.

Again, which do you think is more expensive? The proper medications in the first place or someone who is on disability and — thus — in poverty?

Is letting Canadians die a viable or ethical cost-cutting strategy?


5. They Can Become a Self-Fulfilling Prophesy

Many plans have life-time limits on how much they will reimburse … seriously!

This, too, is a type of cost-sharing, though a particularly callous one. If you are multi-morbid or happen to be on a more expensive drug, like Face of Pharmacare Penny G., doesn’t it stand to reason that you will reach that life-time limit well before the time-limit on your life? Like Penny, most in this situation can do the math.

How does a life-time limit help anyone but shareholders?

6. They Can Create Subtle Subsidies for Big Pharma

It’s true! Depending on the design of the co-payment, they can result in a windfall for industry. How so?

Dalhousie University in Halifax has a plan for the students that offers 100% coverage for generics or 80% coverage for brand names. Clearly the generic is the rational choice in most cases. But where there is an option between a generic and a brandname and there is some form of co-payment, many will opt for the more expensive brandname due to advertising, familiarity, obstinance, confusion, doctor insistence, etc. That despite the extra — though still subsidized — cost.

That is inefficiency. Extra funds flowing to big Pharma as a result of irrational choices just improves their bottom lines with no improvement in outcomes.

7. They’re an Inefficiency Petri Dish

The reality is that we already spend enough money on drugs in Canada to fund Pharmacare for all. It’s just the spending is done so unbelievably inefficiently.

Consider this. There are 133 private health insurers and 102 public drug plans.

Each private plan has a its own reimbursement system, rules, annual negotiation process, co-payment structure, deductible, etc. Some are easy to use. Most, not so much so.

Each public drug plan also has it’s own system and infrastructure. They maintain formularies, means testing, annual reviews of eligibility, their own co-payments and deductibles, etc. They, too, are guilty. But of creating byzantine rules and impenetrable policy.

Each pharmacy chain, each independent pharmacy (are there any left?) must all have their systems work with payer systems. The permutations and combinations are staggering.

Consider how much this system costs. A system — as it is rationalized — designed to reduce abuse that doesn’t really happen. 235 organizations. Pharmacies. Individuals. Rules. Confusion. Gaming.

It’s disheartening. This much money on a system for nothing while 10 percent of the population don’t have decent access to drugs.

8. They Don’t Reduce Health Care Costs

"Only government would believe that you could cut a foot off the top of a blanket and sew it to the bottom of a blanket and have a longer blanket” — unknown

Proponents of the “notion” that co-payments reduce costs take the narrow view that controlling government expenditure and reducing taxes are THE primary issue. Taxes must come down! We must cut government spending!

This stance fails to grasp that reducing government spending and reducing taxes simply results in costs for important services being shifted to other sectors and individual taxpayers directly. Ultimately, total economic costs trend upwards because of private sector inefficiencies and the need for profit-based insurance to provide a significant return to investors.

But here’s the kicker, whether drugs are paid for by government, private and group insurance or 100% out-of-pocket is quite immaterial.

What is important is the impact it has on the whole economy. Does it increase TOTAL cost or decrease it? Shouldn’t we have a system that considers the whole economy?

In Canada — arguably the worst single-payer system on the planet — it is no shock that the fastest growing and most uncontrollable costs in Canadian health care are in drugs and long-term care: two sectors dominated by private organizations. As Raisa Deber, noted University of Toronto health policy expert has remarked, “if we can’t afford public health care, we sure as hell can’t afford private.”

9. They’re un-Canadian and Offensive

When our Medicare system took shape in the sixties it was clear to all that income should have no bearing on access to care. No matter the reason for drugs never being dealt with the same way — never becoming part of our universal system — the principal still stands.

A friend from a previous life, Joanne Spetz, at University of California of San Francisco’s Institute for Health Policy Studies recently remarked about the widely-held US belief that health care is a privilege, “If you take that position to the extreme, one would have to be comfortable with letting people die on the street.”

While that seems to be the way things are in the US, that is not us.

That is not Canada.

Bill SwanComment