Co-payments

The calculation of direct household costs of HIV/AIDS is quite difficult. First, resource consumption is hardly documented, so that patients have to be interviewed or be asked to keep household diaries for all expenditure due to their disease. Second, it is frequently not easy to allot a certain expenditure to a specific disease. Co-payments for drugs, practitioner, and hospital services as well as transport to and from the provider are easily allocated to the COI of this disease. But other direct household costs might be even higher, such as the costs of a special diet, but it is very difficult to analyze whether these costs are really incurred due to this illness. Studies demonstrate that direct household costs might be small in developed countries, but they might make up to 50% of the total COI in developing countries (Su et al. 2006). 

BL Harris, A Stergachis, LD Ried. The effect of drug co-payments on utilization and cost of pharmaceuticals in a health maintenance organization. Med Care 28(10) 907 917, 1990. 

Austria Does not affect 80% of the population. A percentage rate of co-payment for health care is applied to the rest, unless exempted for reasons of low income Combination of co-payment and percentage rate (with exemptions). The scheme of direct payments by the patient is limited to the first 28 days of hospitalization Co-payment for prescription drugs. Drugs not prescribed by health professionals are excluded... 

Finland None. A choice is made between a prior annual payment, a co-payment, and a co-payment with a maximum in the user-shared bill for the annual cost. Varies according to the municipality Maximum payment levels for (daily) hospital stays and for specialist visits Percentage rates of user sharing in pharmaceutical costs... 

Germany None. Elat rate of co-payment for the first 14 days per year of hospitalization, after which there is no cost sharing of any sort Variable co-payment. RP system. No coverage is applied to those pharmaceuticals on public financing negative lists... 

Co-payments, with higher rates for visits outside normal working hours. Larger co-payments for house calls. A maximum is set for the financial participation of the user... 

None for hospital stays. Combination of co-payment and percentage rate of cost sharing for specialist care and out-patient visits. Co-payment in diagnostic services. A maximum is set for the financial participation of the user None for category I in public hospitals. For the rest, co-payments are applied for the fust out-patient visit per episode, and there is a per diem co-payment for the first 10 days of hospitalization per year. Insurers buy free care for both public and private hospitals... 

Sweden Co-payment, with maximum levels of sharing in health service bills, with the exception of hospital in-patient bills Per diem co-payment for in-patient services. Co-payment for therapeutic referrals Co-payment for the first drug prescribed, with significantly lower co-payments for subsequent prescriptions. RP system for medicines with generic equivalents... 

Switzerland Combination of annual deductibles and percentage cost-sharing rates Per diem co-payments for hospitalization User sharing in drug consumption costs, which varies between different health insurance schemes. Negative lists of medicines exclude consumption from public coverage... 

UK None None, except for hospital rest beds Co-payments, although 83% of prescriptions are exempt Negative lists of medicines exclude NHS coverage... 

In Chapter 7, professor B. Gonzalez Lopez-Valcarcel of the University of Las Palmas de Gran Canaria analyses the participation of the insuree in the payment of the price of the pharmaceutical. In spite of the widespread application of pharmaceutical co-payment in European health systems, the author observes that this mechanism does not appear to have been very effective in cost containment. Co-payments represent a way of making the user share the burden of the cost rather than an essential source of income for the public system. Theory and comparative experience of the system alike indicate that the indiscriminate application of co-payments is a source of inequalities, and that in any event its effects on consumption depend largely on prescriber incentives. For this reason the author recommends that co-payments should not be uniform for different population groups, and that they should not be applied in isolation, as their effectiveness is enhanced in combination with other instruments. 

Since 1990, responsibility for containing the public pharmaceutical bill in Spain has fallen to a variety of instruments, none of which has proved particularly effective at cost containment, as can be seen from Table 6.1. These instruments have included stricter control over the National Health Service (NHS) (Sistema Nacional de Salud or SNS) budget for pharmaceuticals, modifications to the co-payment rates for certain drugs for chronic diseases, the exclusion of certain drugs from public financing (negative lists) and agreements with laboratories and pharmacies.1... 

Two mid-term objectives are closely related to the principal goal of RP. The first of them has to do with encouraging price competition, as it provides an incentive for companies to bring their prices close to the reference level. This is precisely one of the reasons why the European Commission5 recommends RP. The second mid-term objective concerns incentives, as it takes into account the cost-effectiveness ratio of prescription drags by increasing the financial responsibility of patients, which in turn may influence prescriber decisions. It is important to note that, unlike in traditional co-payment, under this system the patient s share of the cost of the product is avoidable if the patient and/or doctor select a product with a price that does not exceed the reference price. 

Medicaid programme in the USA, differential co-payment for cheaper drugs, also applied in the USA, and the system based on the lowest-cost alternative in British Columbia (Canada). 

If the retail price fixed by the producer is higher than the RP, the patient pays the difference (variable and avoidable co-payment). 

Let RP be the reference price, CP the price paid by the consumer, EFP the selling price fixed by the laboratory, and k the co-payment rate. In this context, we can analyse two situations ... 

Unlike negative and positive lists, RP does not restrict the list of available medicines for the prescriber and the patient. If the doctor prescribes a product with a price higher than RP, the patient pays the difference but there is no additional co-payment if EFP is equal to or lower than RP. 

This chapter focuses on the issue of co-payment, which occurs in insurance environments when insurer and insured share the payment of the price of the medicine. Using this as our central axis, we begin by addressing certain conceptual aspects, including the various forms, formulas and personal extension of co-payment, in the first section, and in the second section we go on to make a comparison between co-payment in insurance markets and in compulsory public insurance systems. 

In the third section we analyse expected effects from a microeconomic perspective, and we discuss to what extent the neoclassical microeconomic theoiy of demand is applicable to the case of pharmaceuticals. We explore the effects of co-payment on consumption and expenditure, and how it is shared between user and insurer, but also the possible effects on the health of individuals and populations. Equity considerations are inevitably raised in this analysis. The elements on which the analysis hinges in this section are price and income elasticities of demand for pharmaceuticals the role of the doctor as an inducer of demand consumer sovereignty discontinuities in demand functions and other notable exceptions to the classical ma.rgina.1ist. theoiy of demand. These exceptions require special microeconometric models and methods. 

In a short final synthesis, we briefly discuss the political implications of the various different regulation schemes and the present heterogeneity of Europe as regards co-payment practices. 

We define the co-insurance rate or co-payment rate as the (fixed) percentage of the sum that insurees are required to pay out of their own pocket at the moment of purchase. For example, in Spain it is 40 per cent for the employed and for the great majority of listed pharmaceuticals. Some authors use the term co-payment to mean the fixed sum per package that is paid by the user, independently of the price. 

CO-PAYMENT IN INSURANCE MARKETS AND COMPULSORY PUBLIC INSURANCE SYSTEMS... 

However, these results are not applicable to compulsory pubhc insurance, nor to National Health Systems. The most notable differences between drag co-payment in an insurance market and in a National Health System or compulsory public insurance environment lie in their voluntariness or otherwise (users ability to choose their coverage) and the ultimate financing of the services (risk-adjusted premiums as opposed to taxes or social insurance contributions adjusted according to economic capacity). Hence, in compulsory public insurance systems, co-payment regulation is used not only as a health policy instrument but also as one of redistribution of income. 

In this section we examine the possible effects of drag co-payment. We analyse how it affects consumption, prices and pharmaceutical expenditure, and also how this expenditure is shared by the insurer and the patient. We study the differences and similarities between the expected effects of several forms of co-payment. By way of general reference, we present the classification devised by Murillo and Carles2 to describe the effects of co-payment on financing, use and equity of health services (Table 7.1). 

Insurance Coverage of Pharmaceuticals, Use, Moral Hazard and Efficiency. Effects of Co-payment... 

Figure 7.1 shows the situation for an individual consumer with a particular health status. If pharmaceuticals were conventional goods and coverage were complete, that is, without co-payment, the user would purchase the quantity gmax,m other words, carry on consuming until the next package no longer... 

Figure 7.1 Demand functions, co-payment levels and welfare loss...

The market supply function grows with respect to prices. Therefore, if the co-payment rate is raised from level (2) to level (1) the point of equilibrium shifts from B to A. Not only does consumption drop, from Q1 to Q0, but so does the price, from P1 to PQ. This reaction, which has been detected... 

Demand function for a market without insurance, 100% co-payment. 

Let us return to Figure 7.1. When a deductible (D) is fixed, one of two things can happen either it is more than the amount the patient would spend if he or she were not insured, given the market price (P0), or it is less. If the deductible is greater than this expenditure (P0 <90), then the relevant demand function for the patient is that of 100 per cent co-payment, that is, in practice it is as if it he or she were not insured. However, if the deductible does not exceed this figure, then the relevant demand function becomes that which corresponds to... 

If an upper limit is imposed on the amount to be paid by the user, the effect is similar. If the limit does not exceed the amount spent by the patient, given the price of the medicine and the co-payment rate, it is as if no limit had been imposed the effective co-payment rate is the nominal rate (c). In the opposite case, patients jump to consuming the quantity 0max, as if they were totally insured, without co-payment. In this case too, the contribution made by each party to foot the bill is affected. 

---