The Impact of Cost Sharing on High-Value Care

Policy makers have long worried that reducing cost-sharing would lead to health care overuse, but research shows that lowering or eliminating these costs can enhance patient outcomes.¹ By improving access to essential care and supporting treatment adherence, especially for vulnerable populations, reducing financial barriers may help ensure patients receive the care they need.

The session was part of the 2025 V-BID Summit, titled “20 Years of Putting Patients First” | Image Credit: © University of Michigan

This insight led to a groundbreaking shift in thinking, suggesting that eliminating cost-sharing for high-value services wasn’t a moral hazard but a smart investment in health, according to Michael Chernew, PhD, professor of health care policy and director of the Healthcare Markets and Regulation Lab, Harvard Medical School. This idea ultimately helped shape Section 2713 of the Affordable Care Act (ACA), ensuring millions could access preventive care without financial barriers.

During a session of the University of Michigan Center for Value-Based Insurance Design’s (V-BID) 2025 V-BID Summit, Chernew discussed how cost-sharing can either hinder or promote access to essential services, as well as the evolving role of states in shaping health care policy.

Cost-sharing measures emerged at a time when health care policymakers were increasingly focused on quality metrics and chronic disease management, noted Chernew.

“There was a growing amount of research that, in fact, suggested that relatively modest cost-sharing amounts deterred people from getting the care that, I think clinically, we knew was the important care for them,” said Chernew. “The basic idea was to come up with a notion that, ‘Well, let's just avoid the cost-sharing for the high-value things.’”

While traditional economic theory once assumed that cost-sharing would help patients prioritize high-value care while cutting out unnecessary services, evidence from the RAND Health Insurance Experiment showed that individuals often struggle to distinguish between essential and non-essential care, leading them to forgo critical treatments.² This insight helped shape the idea that eliminating cost-sharing for high-value services wasn’t a "moral hazard" but rather a correction of what researchers later termed "behavioral hazard"—the failure to consume beneficial care due to financial barriers, explained Chernew.

Despite skepticism over defining high-value services and the complexity of implementation, the most significant accomplishment was shifting the policy conversation.

“If you go back and think about where we were, the conversation was really not about this; there was really not a discussion about how to preserve access for high-value services,” said Chernew. “I think our biggest accomplishment is we did change the conversation, not just the conversation; I think you can see this in Section 2713 of the ACA.”

Later, the discussion turned to the Make America Healthy Again (MAHA) idea promoted by the Trump administration. Chernew believes that while creating a healthier society through better public health, safer environments, and improved lifestyles is essential, it is not a substitute for access to high-value care.

“All the way we manage our public health infrastructure and the way we manage our environmental infrastructure [and] our food infrastructure, I don't view that in any way as a direct substitute for better medical care,” said Chernew.

Additionally, Chernew highlighted that states play a crucial role in shaping health care policy, particularly through state employee health plans, marketplace regulations, and data infrastructure initiatives. While they lack the broad regulatory power of federal programs, states have led efforts to eliminate low-value care and reinvest in high-value services. Moreover, reductions in Medicaid funding or eligibility may prompt states to experiment with how to achieve greater value with fewer resources, something discussed during other sessions of the V-BID Summit. States will likely respond to federal health care changes by reassessing their policies and determining how to adapt, as seen with Massachusetts already reviewing the impact of federal updates, explained Chernew.

“Everybody's in favor of program integrity in a whole range of ways, but to the extent that there are people that fall through the cracks, you need to begin to think about what that means for the broader MAHA agenda and the broader efficiency the American health care system agenda,” said Chernew.

References

1. Fusco N, Sils B, Graff JS, et al. Cost-sharing and adherence, clinical outcomes, health care utilization, and costs: a systematic literature review. J Manag Care Spec Pharm. 2023;29(1):4-16. doi:10.18553/jmcp.2022.21270

2. RAND's Health Insurance Experiment (HIE). Rand. Accessed March 14, 2025. https://www.rand.org/health-care/projects/hie.html

3. Klein H. House passes budget resolution cutting billions from Medicaid funding. AJMC^®. February 25, 2025. Accessed March 14, 2025. https://www.ajmc.com/view/house-passes-budget-resolution-cutting-billions-from-medicaid-funding