Two recommendations for potential savings in primary health care proposed in the recent McCarthy report include increasing the drugs payment scheme (DPS) co-payment by 25 per cent and introducing a €5 co-payment for general medical services (GMS) patients.
While instruments such as co-payments are not a new phenomenon and have been part of health care reforms world wide for the last decade, doubt has been cast on their use and implementation in Ireland since the publication of the report.
The estimated annual savings for the Government from the introduction of these co-payments combined is substantial at €107 million.
Using co-payments to increase revenue, provides an opportunity for the Government to increase the level of funding available to the health care system without increasing taxes or reallocating resources. This is particularly suitable for a public health care system such as Ireland’s where resources are dependent on public funds.
These savings are achievable with copayments by generating more revenues and reducing moral hazard amongst health care users.
The concept of moral hazard is used to explain a situation of excess use of prescription drugs owing to changes in behaviour.
Currently under the GMS scheme patients who are entitled to a medical card can visit the GP for free. When a patient gets a prescription from their GP, the medicine is dispensed in the pharmacy free of charge to the patient. Eligibility for the GMS system is means tested, and the scheme provides access to health care for persons who without undue hardship could not otherwise access it.
Similarly the DPS means that a patient need only pay the first €120 for prescriptions each month and any prescriptions incurred after the €120 threshold is reached are paid for by the Government. The DPS is available to all citizens who are not entitled to a medical card.
Fundamentally these schemes appear to be fair, accessible and equitable. Moreover the schemes significantly reduce the price of prescription medicines.
Reducing the price of prescription medicines in this way has resulted in a disproportionate increase in the quantity of prescription drugs demanded. This wasteful use of health care resources, caused by unnecessary prescriptions and over prescribing has resulted in increased costs for the Government.
While increased demand is not a cause for concern where prescriptions are essential and life saving, concern arises when the reduced price results in unnecessary costs because patients are left on avoidable repeat prescriptions, brand named drugs are prescribed rather than cheaper, equally effective generics and drugs are stock piling and/or being sold-on on the black market – otherwise known as moral hazard.
Placing a co-payment on prescriptions, as recommended by McCarthy, serves to alter economic incentives by raising the price facing the patient by a small amount. When prices rise, the quantity demanded falls, cetris paribus, and it is anticipated that excess use will be reduced.
However an equity and morality question does arise with the use of such measures.
That is, how can we ensure that the reduction is in the excess prescriptions and not the essential life saving ones?
In recognising health care as an economic good it is imperative that access to life saving medicine is not denied owing to inability to pay. Access should be determined on the basis of need for health care not affordability, in line with the 2001 Health Strategy.
Thus to ensure that patients’ health is not adversely affected, co-payments must be applied with careful consideration.
One solution may be partial application of the co-payment. For example, rather than issuing universal co-payments perchance, the DPS could be amalgamated with the long term illness scheme. This would ensure that high-priority medicines are exempt from the co-payment and copayments are only levied on lower-priority medicines.
Therefore, implementing co-payments to achieve cost savings, by generating revenue and reducing excess use of prescription medicine, is a viable and reasonable option for the Government but should be implemented in a fair and ethical manner.
Aileen Murphy is a lecturer in the Department of Economics at University College Cork. She currently teaches health economics and economics of enterprise and international trade to both day and night students on the BA programme. Aileen is a graduate of University College Cork (BComm, MEconSc). Her research interests include health economics, health technology assessment and the economics of smoking.
Date posted: Friday, January 1st, 2010 at 12:37 pm