Patient Pays

Patient Financing of Healthcare (The Patient Pays)

What’s the Issue?

Canadians would like an efficient healthcare system.  Is this more likely if patients pay for services?

Patient financed healthcare is commonly discussed in terms of user fees.  User fees require patients to pay something up front for access to healthcare services and facilities.  Two common approaches are:

  • co-payments where the patient pays a set amount, with the insurer covering the remainder of the cost
  • deductibles where the patient pays the full cost up to a set amount, at which point the insurance kicks in

Most insurance plans use both.

Another variation eliminates the idea of insurance.   Medical savings accounts (MSAs) are essentially savings plans where tax-deferred funds are set aside.  Patients can then use these funds to pay for medical expenses they incur.  MSAs typically have rules on what qualifies as medical expense (e.g. Can you include your gym membership?  How about a massage?).

In yet another variation, MSAs may be coupled with catastrophic insurance coverage.  In this model, the patient will pay the first bills, but once the threshold has been exceeded, insurance may take over.  These plans vary considerably in terms of where the threshold is set, and the levels of copayments and deductibles.

User fees are often presented as a way of curbing healthcare costs by:

  • Preventing people from overusing the system.
  • Bringing in revenue.

However, research to date suggests two good reasons why patient financed healthcare doesn’t make sense

First, user fees discourage patients from seeking both necessary and unnecessary care.  Faced with user-fees,  people often under-use the system by avoiding preventative care and effective drug prescriptions.  User fees in effect leave us with the burden of deciding  whether or not symptoms warrant medical attention.  For example, when a child has a fever, most parents don’t know whether it’s the flu or the onset of meningitis.   Parents may make the decision about whether to seek healthcare on the basis of whether the user fees will leave enough money to pay the rent, without realizing the potential medical complications.

Which leads to the second finding…

Healthcare financed by patients does not save money.  While user fees sometimes discourage sick people from filling hospital beds or booking doctors appointments, this unused capacity does not save the system much money.   Research shows that these freed up resources are not closed down.  Instead, they end up being filled by people who can more easily afford the user fees, for care they may not need.  That is, user fees may—ironically—encourage unnecessary or marginally useful care in order to make sure the physicians and hospital beds available stay busy.

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Evidence

  • Should Canadians have access to private surgery clinics? On Sept. 6, a trial got underway in B.C.’s Supreme Court and the outcome could have consequences for health care across the country.
  • Helping kids see the future, Every year in Ontario, 4,000 to 6,000 children lose the use of one eye, and countless more do badly in school, because they have an eye problem that is not treated in time. But not this year in Kirkland Lake.
  • Myth: User fees ensure better use of health services, from CFHI. Tough economic times stir up anxiety over the affordability of public services — especially healthcare. As governments struggle to balance budgets, and healthcare spending continues to grow faster than the economy, conditions are ripe for old — and often discredited — policy ideas to make a comeback. User fees are no exception. At first blush, user fees appear to be an obvious solution.
  • About one in four physicians say their patients often have difficulty paying for medications or other out-of-pocket costs. The Health Council of Canada presents How do Canadian primary care physicians rate the health system?, a report that examines physicians’ perspectives on the performance of the health care system based on their experiences with access to care, coordination of care, use of information technology, and practice improvement and incentives. (See infographic).
  • In 1996 Quebec started requiring patients to pay part of the cost of all drugs purchased.  As a result, Journal of American Medical Association study shows that patients reduced their use of less essential drugs and essential drugs, with serious bad effects on their health.
  • U of T professor reviews why Quebec dropping a proposed healthcare deductible for physician visits is a good idea―primarily because user charges can reduce healthcare visits that should be made.  Prof. Stabile proposes an alternative focusing on cost sharing that encourages the use of high-value services and discouraging the use of low-value ones.
  • The recent report from the Organisation for Economic Co-operation and Development (OECD) and its problems:The OECD’s Economic Survey of Canada 2010 argues that much of Canada’s budget challenge “hinges on controlling public health spending.”  The report recommends either squeezing other public spending or to raise taxes or user charges.The Canadian Health Services Research Foundation invited healthcare leaders to a roundtable discussion of the OECD’s report. Particular concern was expressed with the recommendation supporting healthcare user fees which, “…have been shown to breach the equity objectives underpinning the Canadian healthcare system.” See Roundtable report on OECD Economic Survey of Canada 2010
  • When the patient pays, buying insurance is typically part of the package, but that package can change rapidly:  A recent report from the US based Commonwealth Fund describes sharp rises in premiums for employer-sponsored family plans over the period 2003 to 2009 with premiums increasing more than three times faster than median incomes.  Deductibles, things the insurance won’t pay for, have also risen nearly 80% over this period.
  • Country case studies on private health insurance by the Organisation for Economic Co-operation and Development (OECD).
  • Medical Savings Accounts (MSAs) are another way of transferring healthcare costs directly to patients. But would they cut healthcare spending?   Canadian Medical Association Journal article says not really.  Analyzing Manitoba data, researchers show that MSAs would greatly increase costs by giving money to the healthy.

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