High cost-exposure insurance designs have come to dominate U.S. health insurance plans in recent years. However, contemporary evidence that patient “skin in the game” cost-sharing is effective in reducing excessive and unnecessary use of U.S. health care is surprisingly limited. High cost-sharing requirements make treatments less affordable and less accessible for patients who are chronically ill, sicker and economically vulnerable. Those are findings from a systematic literature review by Johnson & Johnson researchers and co-authors published in the Journal of Market Access and Health Policy. The comprehensive analysis of evidence is worthy of attention as state and federal policymakers consider measures to improve Americans’ access to medicine, including cost-sharing reforms.
The rapid growth of plans with high patient cost exposure has led to an ever-increasing financial burden of co-pays, co-insurance and deductibles, in addition to insurance premiums already shouldered by U.S. patients and employers. With an estimated $506 billion annual out-of-pocket cost shifted to patients in 2023 annually, it’s perhaps unsurprising that many Americans are facing growing affordability challenges, including rising medical debt, despite nominally having insurance coverage.
Examining rigorous scientific studies, the review finds scant contemporary evidence to justify the existing levels of patient cost-sharing as a means to encourage efficient healthcare use or advance value-based care in the U.S. The publication cites various studies that suggest that benefit designs with indiscriminate cost-exposure are, in fact, de-coupled from clinical nuance.
For example, patients with established chronic conditions or those acutely ill with specific cancers have little to no control over the timing or necessity of their care. They value access to lifesaving treatments clinicians deem medically essential for survival. It’s also widely accepted that there is no overconsumption in these situations, yet patient cost-sharing requirements generally remain unadjusted for vital medications like insulin or targeted oncology treatments.
The paper further clarifies that health plans already impose substantial constraints, such as prior authorization or step therapy, on the use of treatments to mitigate potential overuse, even after doctors have deemed a therapy appropriate for individual patients. The imposition of continued cost-sharing after these patients and their doctors have already been subjected to stringent utilization controls may simply result in an additional financial barrier to medically necessary care. The conclusion is that rather than promoting efficient utilization, current U.S. cost-sharing practices more likely represent a healthcare consumption tax that disproportionately impacts patients who have chronic illnesses, are sicker or poorer.
The study offers a framework of four principles to guide the reform of insurance benefit design:
- Cost-sharing should be tied to whether an intervention is of high or low clinical value;
- Any evaluation should focus on improvements in actual patient outcomes and quality of life – rather than simply measuring a response in patient demand as “moral hazard” – while also considering downstream impacts on the healthcare system and society;
- Health plans should recalibrate utilization management by reducing reliance on indiscriminate control mechanisms, shifting toward patient-centered models that incorporate data on behavioral incentives;
- Analysis of reforms to benefit design should encompass not only incentives for physicians and medical technology providers, but also cost-shifting to patients from insurers and PBMs for revenue maximization.
At Johnson & Johnson, we believe incorporating these four principles in any cost-sharing policy reforms will result in a more effective, equitable and patient-centered healthcare system.
This research was funded by Johnson & Johnson Innovative Medicine and conducted in collaboration with Prof. A. Mark Fendrick of the University of Michigan Center for Value-Based Insurance Design and researchers at Precision Health, led by Dr. Jim Baumgardner. For full details on the study design, methods and limitations, see: Graf M, et al. Economic evidence on cost sharing and alternative insurance designs to address moral and behavioral hazards in high-income health care systems: a systematic review. J Mark Access Health Policy. Published online November 14, 2024. 2024;12(4):342-368. doi: https://doi.org/10.3390/ jmahp12040027