The first line of treatment for rheumatoid arthritis works effectively for the first customer, but it doesn’t work well in managing the second customer’s symptoms. The second customer’s doctor recommends another treatment that is more effective for her, yet it is on a higher insurance tier and she will need to pay more co-insurance out of pocket.
When is it ethical, or fair, for different patients with the same condition to be paying different amounts for their medications?
To address this question, it’s important to first understand why this situation exists, and then what we can do to fix it.
In the 1990s, payers developed tiered formularies, in which patients pay co-pays or co-insurance out of pocket, as a strategy to manage costs and encourage more-efficient use of health care resources. Formulary tiers are typically based on the cost of treatment rather than the medical appropriateness for the patient. With the rise in innovative specialty medicines, the use of specialty tiers in drug benefits is increasing, resulting in higher co-pays and co-insurance for some patients.
However, your customers with the same or similar condition may need different treatments due to their genetic characteristics, comorbidities or disease severity. This situation requires the use of medications on different formulary tiers and out-of-pocket expenses. And cost sharing, based on formulary tier rather than medical appropriateness for patients, may have unintended consequences on treatment adherence, costs and health outcomes.
To determine when it would be more — or less — acceptable to require higher cost sharing, as well as how the financial burden could be shared across patients, health plan members and employers, the National Pharmaceutical Council brought together an expert roundtable of patient, payer and employer representatives.
Roundtable panelists felt it was least acceptable for patients to have greater out-of-pocket costs if the use of the higher-cost treatment was due to biological reasons such as step therapy or diagnostic results. In contrast, panelists felt it was more acceptable for patients to pay greater out-of-pocket costs when treatment choice was based on preferences to avoid a side-effect risk or the route or frequency of administration.
Five guiding principles emerged from the discussion to understand when variable cost-sharing is less acceptable for patients who require higher-tier formulary medications:
• “Try and fail” is important — If the initial lower-cost therapy is unsuccessful, patients should have access to the higher-cost therapy and lower out-of-pocket costs.
• Benefits are certain and significant — If there is high confidence that the health benefits of a treatment are significant, then financial barriers should be lowered.
• Costs must align with benefits — If the treatment costs are balanced with better effectiveness and safety, then cost sharing should be lower.
• Don’t penalize patients for “bad luck” — If patients need higher-cost treatment based on their biology or genetics, then cost-sharing should be reduced.
• Lower, but do not eliminate differences in, out-of-pocket costs — Cost-sharing differences incentivize trying lower-cost treatments first, but big jumps in costs for patients should be avoided.
Putting this concept into practice will take some effort, because there are practical barriers that must be first be resolved to align out-of-pocket costs at the pharmacy counter with appropriate care:
• Ensure that evidence is available about which treatments work for which patients. Figuring out which patients should be getting a higher-tier treatment but paying less requires clinical evidence. A number of different organizations are developing comparative effectiveness research studies, thus gaining a better understanding of which treatments work best, particularly under real-world circumstances.
• Facilitate the linkage of benefits and appropriate care. Strong information technology backbones are required to link cost sharing to patient characteristics like test results or medication history. Linking medical and pharmacy networks would make it easier to determine co-pays or co-insurance at the pharmacy counter, too.
• Increase consumerism and member communication. Incentivizing patients to use medically appropriate treatments requires engaging plan members as active rather than passive consumers of health care. More and better information is a key part of this process.
• Balance the effect of cost-sharing, premium and deductible changes. For payers, options such as increasing premium contributions or deductibles for all plan members, raising lower-tier cost sharing for all medications, or spreading cost sharing for lower-tier medications across patients with the particular condition all have trade-offs. Without careful consideration, these tactics could result in lower use of therapies and higher hospitalization rates.
• Avoid unintended consequences for patients, employers and plans due to benefit changes. Employers and health plans are at risk if sicker employees choose employers or plans with richer benefits. For small businesses, pooling risk through the small business exchanges may reduce unintended consequences. For health plans, risk adjusters can mitigate adverse selection issues while allowing plans to remain competitive.
With the health care industry moving from volume- to value-based care, the fairness and incentive to follow appropriate care pathways while keeping patients’ costs low is taking center stage. For stakeholders involved in benefit design to succeed in incentivizing the right care, a one-size-fits-all approach to cost sharing will not work well in this changing environment.
Cost sharing is appropriate in the right situations, but when a treatment is proven and medically necessary, your customer’s bad luck is not one of them.