One Method Is to Get Americans to Take Their Medicine
As we reported in our last newsletter, U.S. health care spending has been rising between 5% and 6% lately, compared with inflation of a little under 2%. That rate is forecast to prevail for the next decade.
While such increases raise serious concerns, this is not the 1970s, when health care spending rose an average of 12% annually, or the 1980s, when the average was 10%. By the 1990s and the early part of the 2000s, increases had dropped to between 5.5% and 6% a year and dropped to 2- 3% between 2008 and 2013. Since then, in part because of the extension of health benefits to more Americans, we’re back to the levels of the ‘90s and early 2000s.
Bending the cost curve has become an important political issue and a major challenge for health care policy makers and practitioners. We need to reform the system to constrain costs and make sure are spending on the right priorities, but, first, it’s important to understand the real reasons for those higher costs.
The historic figures come from the Peterson-Kaiser Health System Tracker, a respected joint venture launched two years ago by the Peterson Center on Healthcare and the Kaiser Family Foundation. The Tracker also provides a lot of edifying charts. One of them shows the average out-of-pocket costs paid by Americans for physicians, hospitals, and prescription drugs.
Individual Americans pay far more out of our own pockets for drugs than for hospitalization (twice as much in 2015) – even though total drug spending, by all payers, is less than one-third of total hospital spending: about $300 billion vs. about $1 trillion.
The reason for this disparity: insurance companies construct their policies so that they reimburse more hospital costs than drug costs. From a long-term health policy perspective, this approach makes little sense because it discourages drug spending while encouraging hospital spending.
Smart strategy would do the opposite. Spending on drugs often prevents spending on hospitals.
For example, by regularly taking medicines that hold down cholesterol or blood pressure, patients reduce the chances that they will end up in a hospital or nursing home with a heart attack or stroke. A 2005 study by Michael Sokol and his colleagues, titled “Impact of Medication Adherence on Hospitalization Risk and Healthcare Cost,” published in Medical Care and cited by 1222 other researchers, examined 137,000 patients with health insurance and found:
For diabetes and hypercholesterolemia, a high level of medication adherence was associated with lower disease-related medical costs. For these conditions, higher medication costs were more than offset by medical cost reductions, producing a net reduction in overall healthcare costs.
For diabetes, hypercholesterolemia, and hypertension, cost offsets were observed for all-cause medical costs at high levels of medication adherence. For all 4 conditions, hospitalization rates were significantly lower for patients with high medication adherence.
These findings, repeated in other studies, such as one by P. Michael Ho, et al., titled “Effect of Medical Nonadherence on Hospitalization and Mortality Among Patients With Diabetes Mellitus,” in JAMA Internal Medicine, are simply common sense.
Overall medical cost savings per additional dollar spent on medicines range from $1 to $37, depending on the medicine and the disease. So it’s clear that taking drugs reduces costs elsewhere in the system.
People Don’t Take Their Prescription Drugs
Unfortunately, non-compliance is rampant. A study of more than 75,000 insured patients found that 30% failed to fill a new prescription. Another study found that 50% of prescriptions were either not filled or were not taken as directed. The cost burden of poor compliance and non-compliance is estimated as high as $290 billion a year – roughly the same amount spent on all prescription drugs.
If we really wanted to hold down health care costs, we would put more effort into finding ways to get people to fill prescriptions and take their medicine. A better insurance benefit structure, with lower co-pays and deductibles goes a long way.
But there are also methods to make it easier to comply. One is called “medication synchronization.” The idea is that pharmacists make an appointment with a patient to pick up all medications at the same time -- once a month or every 60 or 90 days – and to discuss other health issues, including smoking cessation, over-the-counter medicines, and vaccination requirements.
Patients in Part D Medicare plans have the opportunity to engage in medication synchronization with the approval of their pharmacies or physicians. The Centers for Medicaid and Medicare Services found that costs are minimal and overall health care savings are in the billions of dollars. A recent article in the American Journal of Managed Care found that medication synchronization programs…
have been shown to increase medication adherence in patients taking chronic medications. These programs were shown to have a significant cost-benefit for healthcare payers by reducing medical utilization and costs. Payers should consider supporting the provision of these programs in community pharmacies.
Adult Vaccinations Hold Down Costs
A second way to lower health costs is through adult vaccinations. While vaccination rates for major diseases are 90% or more for children (in large part because schools won’t let unvaccinated kids attend), the rate for adults is much lower. Only 50% get a flu vaccination annually and only 20% of even high-risk patients get a pneumococcal vaccine. The result is a higher rate of lost working time, hospitalization, and death.
A study by Sachiko Ozawa of the University of North Carolina and seven co-researchers, published in the November issue of Health Affairs, estimated that adults who are unvaccinated for 10 diseases for which vaccines are available and recommended were responsible for a $7.1 billion “economic burden” in the U.S. in 2015. The majority of that cost is for inpatient expenses.
Recent research shows that people are more apt to get vaccinated if high levels of people in their communities are getting vaccinated. A recent study found that an increase in the vaccination rate in a community from 10% to 90% has the same effect on utilization as a decline in vaccine price of 50%. But how to encourage vaccinations?
One way is for state health societies to disseminate a vaccine schedule for adults in public service announcements. Another is for businesses to encourage their workers to be vaccinated by giving them time off or inviting medical personnel into the office to perform the vaccinations.
Broaden the Aperture
The key is to broaden the aperture of the discussion of health costs. It is a complicated subject. Simply saying that this drug or that procedure is expensive, doesn’t address the real issues. The road to meaningful reform begins with an understanding of the facts and the options. That is the aim of this newsletter.
Online newsletter dedicated to helping you understand the costs and benefits that sometimes lie obscured in our complicated health care system