An Bord Snip recommends that people contribute more to their drug costs which will raise revenue but probably lower drug use, writes AILEEN MURPHY.
THE RECOMMENDATIONS in the An Bord Snip report to reduce health expenditure by increasing the drugs payment scheme (DPS) co-payment by 25 per cent and introducing a €5 co-payment for general medical services (GMS) patients have come in for strong criticism in recent days.
The introduction of co-payments or user charges in healthcare is not a new phenomenon.
User charges and co-payments have been part of healthcare reforms worldwide for the past decade, and can serve two purposes.
One purpose is to reduce moral hazard among healthcare users, and the second is to increase revenue.
Using co-payments to increase revenue provides an opportunity for the Government to increase the level of funding available to the healthcare system without increasing taxes or reallocating resources.
This is particularly suitable for a public healthcare system such as the Republic’s.
The second rationale is that such co-payments may reduce the wasteful use of healthcare resources incurred by unnecessary prescriptions and/or over prescribing.
This relates to the concept of moral hazard which can be used to explain a situation of excess use owing to changes in behaviour. The DPS and GMS schemes provide lower cost and free prescriptions respectively to those who meet the eligibility criteria. So GMS patients, for example, who can visit the GP free, will get a prescription from the GP which the pharmacist will dispense.
Fundamentally this appears a fair and equitable system, after all eligibility for the GMS system is means tested and is designed to provide access to healthcare for people who, without undue hardship, could not arrange general practitioner medical and surgical services for themselves and their dependants.
The issue of moral hazard however, arises when this cover for prescriptions changes the economic incentives facing both the patients and the healthcare providers (GPs and pharmacists).
This can result in excess use of services as explained by the law of demand: which states that as the price of medicines decreases, the quantity of medicines demanded will increase cetris paribus.
For such patients the price is considerably lowered, and quantity of prescription drugs demanded has increased disproportionately.
This should not be an issue for lifesaving medicines, because a person would have visited the GP and got a prescription regardless of whether they had to pay for it. The concern arises when people alter their behaviour because of the changes in price. Evidence of this points in particular to repeat prescriptions.
Owing to changing economic incentives, due to low/zero prices, behaviours change. Perhaps GPs are less cautious about the quantities of prescriptions they write, and even shy away from generic drugs as seen in recent debates.
This can result in the persistent issuing of repeat prescriptions, which can stockpile in people’s drug cabinets. Concerns about this even led to a HSE-driven scheme known as DUMP (Dispose of Unused Medicines Properly). The over-dispensing of prescription medicine can even give rise to black-market opportunities, whereby those who are entitled to free medications can sell it on to those who are not eligible for the GMS scheme and have to pay for GP visits and prescriptions.
Thus co-payments and user charges increase the price of medicines which can have a dual effect: raising much needed funding for Government and reducing excess use because, as price increases, quantity demanded decreases.
However, in imposing cost-saving measures you must consider that healthcare is different. In a public healthcare system, such as the one in Ireland, the Government is both a provider and funder of healthcare and healthcare should not diminish due to economic hardship.
So while user charges or co-payments are a useful tool in increasing funds available in a public healthcare system and avoid excess use, there is an equity issue.
Rather than issuing universal user charges and/or co-payments, perhaps a potential solution would be to re-examine the list of medicines which come under the GMS and DPS.
Perhaps the DPS scheme could be amalgamated with the Long Term Illness Scheme (which provides necessary medicines and/or appliances free to people suffering from one or more of a schedule of illnesses, irrespective of income).
This would ensure that high-priority medicines are exempt from the co-payment and user charges/co-payments would only be levied on lower-priority medicines.
Lower-priority medicines could include those required for those going on tropical holidays.
These are covered by the current schemes and yet, as said by one GP, surely those who can afford holidays to tropical destinations can afford the necessary anti-malaria medicine and insect bite cream.
Implementing user charges or co-payments as a method of generating revenue and reducing the excess use of prescription medicine is a viable and reasonable option for the Government if implemented fairly. Achieving this would mean not targeting the lower income groups, with poor health, who these schemes were designed for.
Aileen Murphy is a lecturer in the Department of Economics at University College Cork