RAND Health Insurance Experiment Totally Explained

Everything about The Rand Health Insurance Experiment totally explained

The RAND Health Insurance Experiment (RAND HIE) was a comprehensive study of health care cost, utilization and outcome in the United States. It is the only randomized study of health insurance, and the only study which can give definitive evidence as to the causal effects of different health insurance plans. Most health economics studies are observational, and can only give associational evidence. Although the fieldwork of the study was conducted between 1974 and 1982, the results are still highly relevant, since RAND HIE is the only study which can make causal statements.

Conclusions

Newhouse, in summarizing the RAND study, reported that visits to doctors and hospitals decline with higher cost sharing "although for low income families such cutbacks reduced their use of beneficial as well as unnecessary services and was estimated to have increased rates of death from preventable illness." In the general study group, there was no measurable difference in health states between the groups, but for subgroups such as the chronically ill, chronic illnesses such as diabetes and high blood pressure were not as well controlled among the high cost-sharing group than among the low cost-sharing groups.
In a 2007 update, RAND researchers published a review of the literature on cost sharing published between 1985 and 2006. They concluded:

Increased cost sharing is associated with lower rates of drug treatment, worse adherence among existing users, and more frequent discontinuation of therapy. For each 10% increase in cost sharing, prescription drug spending decreases by 2% to 6%, depending on class of drug and condition of the patient. The reduction in use associated with a benefit cap, which limits either the coverage amount or the number of covered prescriptions, is consistent with other cost-sharing features. For some chronic conditions, higher cost sharing is associated with increased use of medical services, at least for patients with congestive heart failure, lipid disorders, diabetes, and schizophrenia. While low-income groups may be more sensitive to increased cost sharing, there's little evidence to support this contention.

History

In 1971, the RAND group, led by health economist Joseph Newhouse and including health service researchers Robert Brook and John Ware, health economists Willard Manning, Emmett Keeler, Arleen Leibowitz, and Susan Marquis, and statisticians Carl Morris and Naihua Duan, set out to answer the question (among others): "Does free medical care lead to better health than insurance plans that require the patient to shoulder part of the cost?". The team established an insurance company using funding from the then-United States Department of Health, Education, and Welfare. The company insured 5809 people, randomly assigned to insurance plans that either had no cost-sharing, 25, 50 or 95% copayment rates with a maximum annual payment of $1000. It also randomly assigned 1,149 persons to a staff model HMO, the Group Health Co-operative of Puget Sound. That group faced no cost sharing and was compared with those in the fee-for-service system with no cost sharing as well as an additional 733 members of the Co-operative who were already enrolled in it.
The study opened the way for increased cost-sharing for medical care in the 1980s and 1990s.

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