Seniors’ pattern of out-of-pocket co-pays says much about US healthcare

The Supreme Court is currently debating whether or not the Affordable Care Act is constitutional. Whether the court does or does not overturn the law, affordability will be an issue for many Americans, even those with health insurance.

The problem: copayments.

Most insured Americans might pay a $20 copay at their doctor’s office or a $10 copay at the pharmacy. For many, the price is even higher.

Economists view copayments as an important part of cost control. If people don’t pay any price for their healthcare, then — the argument goes — there’ll be too much waste. But there’s an issue with copayments that many experts have long ignored. What happens to the person who needs to see a doctor but doesn’t have the $20 for the copay? For those with the cash, a $20 copayment might amount to a nudge that gets them to use healthcare judiciously, cutting back on unnecessary care. For those with no cash at all, though, the copayment amounts to a brick wall.

My co-authors, Tim Layton and Daniel Prinz of Harvard Medical School, and I recently wrote a study to explore this issue.

Each month, 64 million Americans receive their Social Security checks. We studied data on the Medicare Part D program to measure how those Social Security checks affect prescription fills at American pharmacies.

We found a stark, striking pattern.

Prescription fills increase by 6–14 percent on days when people receive their Social Security checks. Our estimates suggest that 1.3 million prescription fills are delayed each year until recipients’ Social Security checks arrive.

What’s more, we found an effect of Social Security checks even for prescription fills of drugs that are very important, drugs that doctors implore their patients to take carefully. We observed a spike in prescription fills for anti-seizure medications, for example, and blood thinners. Many Americans, it seems, wait until their Social Security checks arrive before they fill prescriptions for medications that might save their lives.

That’s not to say that all healthcare should be free of charge for everyone.

Economists have known for decades that copayments really do prevent waste. When people have to pay, at least a token price for their healthcare, they consume less healthcare, and, on average, their health does not suffer. That’s why copayments are not solely an American phenomenon, and why most health economists would not support getting rid of copayments entirely.

But our work suggests that copayments can be especially problematic for low-income Americans, who are more likely to be stuck at the end of the month without any cash on hand. Our results suggest that Medicaid recipients, in particular, should not be required to pay copayments. And, more generally, we need to think critically about how health insurance should be structured for those who have very little income.

To many, our research might seem obvious. Of course, those without money will put off filling their scripts until they have the money. Why should we be surprised? And, to that point, many studies have already shown that consumers delay spending until their paychecks arrive.

The thing is, spending on healthcare is different. Putting off healthcare can affect health. And when whole populations have health problems, we all foot the bill.

Tal Gross is associate professor of markets, public policy and law at Boston University’s Questrom School of Business. Follow him on Twitter @talgross