Skin in the game at Pizza Hut!

This morning I read Aaron Carroll’s nice piece on AcademyHealth’s blog noting that prices and not consumption are primarily to blame for the high health care costs in the U.S.

Fast forward a few hours later, and I am eating at Pizza Hut with the other chaperone’s for one of my kid’s school field trip and they ask what I do and I tell them. Immediately out of one dad’s mouth is “the problem with the health care cost problem is all the parasites of the system who don’t have enough skin in the game!” Back when I was blogging for the Incidental Economist, and something went wrong Austin used to say “I can hear Aaron screaming now.”

I heard Aaron Carroll scream around Noon today in a Durham Pizza Hut.

I went on to chat with the nice folks at my table about health policy for about 5 minutes or so and I talked about out of pocket costs, even for persons in Medicare and other salient points. He just looked at me like I had three heads (we weren’t drinking, it was a field trip). As we talked a bit more about employer provided insurance, I came to realize that he didn’t realize that his employer had paid the vast majority of the costs of his families private health insurance premium; he seemed to think his share was the total premium. In one sense, that could be understood as a “skin in the game” problem, and that he didn’t have enough because he had been shielded from the true cost of his health insurance. In economic terms I am quite confident that he has paid for that via lower wages, but this perspective is surely one of the negative by-products of employment being the primary way non elderly persons get health insurance.

I confess to despair at times about how we will ever make reasonable, evidence based health policy. Maybe we won’t. The technical problems are nothing compared to the cultural ones. The notion that what I have I earned and deserve, and what others have is both better and not deserved seems endemic in our country. It is enough to make someone scream. Go ahead Aaron, let one out for me.

update: I fixed a typo.

Even more on skin in the game and Cancer

Yousuf Zafar, my colleague here at Duke presented today at the American Society of Clinical Oncology annual meeting on a study showing out of pocket costs for moderate-to-low income Cancer patients averaged $712 per month (I am a co-author). The study shows a variety of mechanisms that patients use to cope with these costs, including not filling prescriptions, cutting pills in half, and going into debt. I cannot share more details on the blog at this time because the paper has not yet been accepted for publication.

However, the role of out of pocket costs and its role in health care and health reform has gotten a great deal of attention of late. Austin and Aaron have been writing a great deal about skin in the game, including more today from Austin where he usefully points out that premiums are a large part of health care expenditures for Medicare beneficiaries. I wrote last week on a recent study showing that 1 in 10 Cancer patients didn’t fill their initial anti-Cancer medication due to out of pocket costs. Yousuf’s new study helps to further demonstrate that sick people (Cancer in these studies) pay quite a lot out of pocket for health care in our current system. Such cost sharing lessens the amount of care received by sick people, and it is unclear if the blunt tool of out of pocket costs does a good job of prioritizing wasteful from productive spending. As I said last week, if you are worried about costs and rationing of care, high deductibles for sick people should have you worried.

Skin in the game and cancer

A recent study by Sonya Streeter and others from Avalere Health published in the Journal of Oncology Practice (JOP) shows that 1 in 10 patients with newly diagnosed Cancer did not fill their initial oral anti-Cancer prescription.* One of the primary reasons patients did not not fill these prescriptions was high out of pocket cost-share. The portion of Table 2 below (only the odds ratios focused on impact of cost sharing are shown; other factors were controlled for) highlights the impact of cost sharing on not filling newly prescribed oral anti-Cancer medicines:

As compared to those whose pharmaceutical cost share was $0-$100, persons who had to pay $500+ dollars to fill their initial anti-Cancer prescription were around 4.5 times more likely to not begin their prescribed medicine; those with cost shares above $200 were consistently more likely to not fill prescriptions, again as compared to those with cost share ranging from $0-$100. The portion of Table 1 (below) shows the distribution of cost share amounts for an initial oral anti-Cancer therapy that were observed in the study, as well as insurance status.

While 72.7% of the 10,508 study subjects faced a cost share amount between $0 and $100, 16.4% had a cost share over $500; 45% of Medicare beneficiaries faced a cost share of over $500 for their first anti-Cancer drug. Interestingly, cost share amounts between $100 and $500 were relatively rare. The study included both age-eligible Medicare beneficiaries, and younger persons who were covered by commercial insurance. What does this mean?

  • For folks who say they hate rationing, this is an example of rationing based on price. That is the theory of high deductible insurance, that people will think twice and decide to spend less. This is an example of that theory being borne out as true among persons with Cancer. A key question is what impact did not filling these prescriptions have on health, which is not addressed in this study.
  • Many people already have a great deal of skin in the game as Aaron (and many others) including Austin have written a lot about lately (you could spend all day in the links down those two links). This study is yet another example that many now face high out of pocket costs, here showing that to be the case among persons with newly diagnosed Cancer.

The reality of high deductible health plans is that they work great for healthy people. And such plans are a very reasonable choice for young, seemingly healthy individuals. But those people do not drive expensive health care utilization, sick people do. High deductible health plans will likely have limited impact on total costs for the sick as well, since persons with an annual maximum will quickly spend more than the cap of even a catastrophic policy in one night in the hospital. And increased cost share for recurring items such as pharmaceuticals may serve to reduce spending in a way that may harm patient health. Bottom line: if you are worried both about costs and the rationing of helpful therapies, it will take a different approach than simply increasing skin in the game to slow costs while rooting out non-productive from productive health spending.

*The study analyzed 2007-09 and considered the following oral anti-cancer drugs: capecetabine, imatinib, sorafenib, lenalidomide, sunitinib, erlotinib, temozolomide, lapatinib.