Copayment

A copayment, or copay, is a flat dollar amount paid for a medical service by an insured person. Insurance companies use copayments to share health care costs to prevent moral hazard. Though the copay is often only a small portion of the actual cost of the medical service, it is thought to prevent people from seeking medical care that may not be necessary (eg: an infection by the common cold), which can result in substantial savings for insurance companies. The underlying philosophy is that with no copay, the perception is that medical care is "free" and then is used more often.

However, a copay may also discourage people from seeking necessary medical care. The RAND Health Insurance Experiment, a landmark study performed in the 1980s, demonstrated that cost sharing reduced appropriate and necessary office visits and preventive care as well as inappropriate visits, with adverse effects on visual acuity, blood pressure control, and survival among high-risk patients.

Medication copayments have also been associated with reduced use of necessary and appropriate medications for chronic conditions.

In a 2007 meta-analysis, RAND researchers published a review of the literature on cost sharing 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 is little evidence to support this contention.