Historical%20Trends%20in%20Cost-Sharing

1
Historical Trends in Cost-Sharing
60
Out-of-pocket spending as a percentage of all
personal healthcare spending
50
40
Percentage of total spending
30
20
10
0
1960
1965
1970
1975
1980
1985
1990
1995
2000
2001
2002
Source Centers for Medicare Medicaid
Services, 2004.
2
What Explains the Increase in Total Medical
Spending over the Last Fifty Years?
Aging
Technology
Income
Insurance
Prices
3
Features of risks that should be insured

• Unlikely
• Expensive
• Uncertain
• Use is not sensitive to insurance (inelastic
  demand)

4
Why do we have health insurance?

• Insurance against financial loss
• Transfer money to people who are sick
• Tool for population health?

5
So how does cost-sharing line up with our
insurance goals?

• Example 1 Traditional oral agents like
  anti-hypertensive drugs
• Not rare
• Not expensive
• Not uncertain
• Not a good candidate for insurance
• Now covered generously
• Example 2 Specialty drugs like Avastin for
  metastatic cancer
• Rare
• Expensive
• Uncertain
• Trend is to require extreme cost-sharing to pass
  risk back onto patients