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Massachusetts health care — wonky, with a healthy dose of reality

What If RAND Were WRONG?

What If RAND Were WRONG?

October 8, 2007

For a quarter of a century, US health policy has been influenced by the findings of the largest social science experiment since Noah’s ark – the RAND Health Insurance Experiment. The experiment randomly assigned thousands of families to insurance plans with different levels of cost sharing, and then followed them for up to five years. The results proved for the first time that there is a demand curve for health services – that higher cost sharing leads individuals to use fewer health services, and further that (except for some lower income patients) the lower use of services had no negative health impacts. The results live with us today – thinking about all kinds of cost sharing: deductibles, copayments, coinsurance, health savings accounts, finds essential support in the RAND findings.

Locally, MIT Prof. and Connector Board member Jonathan Gruber is a big RAND fan. Last year, he wrote a report for Kaiser (click here) calling RAND “the gold standard” in evaluating the extent to which higher coinsurance reduces use of medical services and results in patient harm:

“Perhaps the most striking conclusion from the HIE is that while higher coinsurance rates lead to lower levels of both effective and ineffective medical utilization, they do not have an adverse impact on health outcomes for the average person.”

But, what if RAND is WRONG?

That’s the disturbing conclusion from a new paper in the October 2007 issue of the Journal of Health Politics, Policy and Law, but Dr. John Nyman of the University of Minnesota (click here). Nyman went to original sources, looked under the hood, and found a few surprises:

"Of the various responses to cost sharing that were observed in the participants of the RAND HIE, by far the strongest and most dramatic was in the relative number of RAND participants who voluntarily dropped out of the study over the course of the experiment. Of the 1,294 adult participants who were randomly assigned to the free plan, 5 participants (0.4 percent) left the experiment voluntarily during the observation period, while of the 2,664 who were assigned to any of the cost-sharing plans, 179 participants (6.7 percent) voluntarily left the experiment. This represented a greater than sixteenfold increase in the percentage of dropouts, a difference that was highly significant and a magnitude of response that was nowhere else duplicated in the experiment.

"What explains this? The explanation that makes the most sense is that the dropouts were participants who had just been diagnosed with an illness that would require a costly hospital procedure. … If they dropped out, their coverage would automatically revert to their original insurance policies, which were likely to cover major medical expenses (such as hospitalizations) with no copayments … As a result of dropping out, these participants’ inpatient stays (and associated health care spending) did not register in the experiment, and it appeared as if participants in the cost-sharing group had a lower rate of inpatient use. … the cost-sharing participants who remained exhibited a lower rate of inpatient use than free FFS participants, not because they were responding to the higher coinsurance rate by forgoing frivolous hospital care but instead because they did not need as much hospital care, since many of those who became ill and needed hospital care had already dropped out of the experiment before their hospitalization occurred. ...

"To my knowledge, RAND researchers have yet to present a benign explanation for this large and statistically significant voluntary attrition rate differential."

Sorry – the Journal is not available for free – but send me an email (mcdonough@hcfama.org) and I’ll send you a copy of this article. I have no idea if Nyman is correct, but his findings deserve a significant airing. Too many folks are getting crammed with cost sharing – and if the RAND findings are suspect, we all have a right to know.
John McDonough