Gruber on RAND and the Role of Co-Payments

The Kaiser Family Foundation released a new report today on “The Role of Consumer Co-Payments for Health Care: Lessons from the RAND Health Insurance Experiment and Beyond.” The report was written by MIT economist Jonathan Gruber.

Faithful followers of this blog and MA health reform know Gruber is a board member of the MA Connector Authority, the key reform entity now designing non-subsidized insurance plan offerings for release next summer. Because of this, his report especially demands attention.

RAND remains today the largest social science experiment in US history. It proved there is a demand curve for health services, and that charging various levels of cost-sharing would influence that demand. It also found that for average folks, the decline in consumption did not adversely affect health status. It also found that for some lower income folks, especially those with chronic illness, cost sharing did have an adverse impact on health status. Recent research has not contradicted these core findings.

Gruber’s report is a good summation of the evidence, and draws implications for today’s challenges — he doesn’t mention MA health reform, but the connections are inescapable:

1. Cost sharing can reduce spending without harming the typical person’s health.

2. Income-related cost sharing is better than non-income related cost sharing.

3. Co-insurance should be targeted to promote effective health care use.

4. Some approaches — such as service caps and health savings accounts linked with high deductible plans — carry significant problems.

Definitely worth a read. Click here for the full report.

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