Health Literacy

Helping Patients Understand Healthcare Costs

On Call Magazine, April 2007

By Helen Osborne, M.Ed., OTR/L
President of Health Literacy Consulting,

William Shrank, MD, MSHS, knows a lot about healthcare costs, especially the copays (out-of-pocket expenses) that patients spend on prescription medications. Shrank not only is a practicing physician but also an instructor at Harvard Medical School and the division of pharmacoepidemiology and pharmacoeconomics at Brigham and Women’s Hospital in Boston.

As a researcher, Shrank looks at the big picture of health economics and studies how the cost of prescription medication affects physicians, pharmacists, and healthcare systems. And as a physician, he sees the more personal side of how out-of-pocket expenses can have an impact on a patient’s health. Shrank talks about a man he is treating who has several chronic conditions. He has prescribed numerous medications for this patient but recently learned he does not always fill them. It turns out this man is on a fixed income and, despite having health insurance, must sometimes choose whether to pay for rent, food, or drugs. Shrank says that when faced with these choices, “drugs don’t always win.”

The Value of Opportunity

The situation Shrank describes is all too common in healthcare today. What is unusual is that Shrank and his patient talked about it. Once Shrank learned of the choices this man must make, he changed his patient’s prescriptions from nonpreferred drugs (with the highest copays) to less costly generic and preferred ones.

While many providers agree it is important to talk about healthcare costs, they are not equally clear about whose job it is to do so. Shrank thinks that all health professionals can help. Below are suggestions he offers for ways to get started. Many of the examples that follow apply to the cost of medication. But the principles are the same whether you are talking about transportation to and from the office, arranging daycare for an elderly parent, or participating in patient education programs. Patients often need to be encouraged to talk about healthcare costs. And when they do, it’s important to listen to their concerns and help them explore their options.

Ways to Approach Discussing Healthcare Costs With Patients

Know the basics of healthcare costs. Almost every day, there seems to be new information about healthcare costs. It can be hard to keep up to date. Patients are likely to have an even more difficult time understanding the complexities of cost structures and payment options.

It’s important to learn the basics of healthcare costs and then to teach this information to patients in ways they can understand. One example would be to explain drug formularies. As defined by Medicare Part D, this is “a list of prescription medications that a drug plan will pay for.” Most insurers offer three tiers within a formulary: generic (lowest cost); preferred (middle cost); and nonpreferred or brand name (highest cost) drugs.

But just explaining what a formulary is is not sufficient. You also need to teach patients that there can be several options within each tier as well as cost differences when purchasing prescriptions at the pharmacy or by mail. In my health plan, for example, one month’s supply of a generic drug costs $5/month while a nonpreferred drug is $40/month. When patients understand what is available to them when it comes to filling prescriptions, they can discuss cost saving options in the provider’s office and with the pharmacist.

Open the lines of communication. In most purchasing situations, buyers want to talk with sellers about ways to save money. Admittedly, healthcare transactions are more complex, but the principles remain the same — one party has to pay for services and goods rendered by the other. Shrank says there are a couple of reasons why patients and healthcare providers seldom have conversations about costs.

For one thing, patients rarely initiate conversations about expenses. In part, Shrank says, this may be due to patients feeling embarrassed or ashamed about financial concerns. Time is also a factor. In a brief office visit, patients, like their doctors, are usually more concerned about diagnosing health problems than about talking about how they plan to pay for treatment.

Likewise, physicians and other healthcare providers seldom start discussions about costs. In a recent survey, Shrank found that almost all physicians agree it is important that patients’ out-of-pocket costs be managed. But only about one-third of those surveyed believe it is their job to do so.

You can help open lines of communication by routinely asking patients if they are taking their prescribed medications. This might be done when taking a patient’s health history or vital signs. If you ask, “Are you taking (x) medications?” and the patient says no, follow up with a question about why. If the answer has to do with money, encourage patients to ask about less costly options.

Use plain language. Many health plans now mail patients letters about the cost of prescription drugs. These letters often include a statement along the lines of “You are currently charged (x) for this medication and there is a generic for (y) that will cost less.” Shrank knows of no research about the effectiveness of these letters and wonders, from a health-literacy perspective, how well this information is being communicated. You can help by offering to review the readability of these letters and advocating for them to be rewritten in plain language.

Explore the use of technology. Find out what tools there are that can help patients understand and get a handle on their healthcare costs. Once you learn about them, you can then work with patients to make sure they know how to use them. One important step in this process would be to ask about access to computers. Does the patient have one at home? Is there someone who can help the patient learn how to use it if he or she doesn’t already know? Can the patient go to the library to get on line?

Other tools patients might use include videos they can borrow from the library for exercise or diet instruction rather than paying fees to join a class. Instruction in how to join an email support group can save the patient the expense of transportation to meetings while at the same time providing access to a community of individuals who share the patient’s concerns.

Consider the human costs. Everyone agrees that it is expensive being a patient. A recent study looked at patients’ nonmedical costs at three phases of cancer care. These costs included time spent traveling to and from care, waiting for appointments, and receiving consultation from providers. They totaled hundreds to thousands of dollars per year. By talking with your patients about these costs, you can help them find ways to reduce them and relieve part of the stress involved in getting good healthcare.

Ways to learn more:

  • William Shrank, MD, MSHS, is an instructor at Harvard Medical School and at the division of pharmacoepidemiology and pharmacoeconomics at Brigham and Women’s Hospital in Boston. You can reach him by email at
  • Yabroff et al. “Patient Time Costs Associated With Cancer Care,” Journal of the National Cancer Institute. 2007; 99: 14-23
  • Shrank WH et al. “The Implications of Choice: Prescribing Generic or Preferred Pharmaceuticals Improves Medication Adherence for Chronic Conditions,” Archives of Internal Medicine; Vol. 166, February 13, 2006: 332- 337.
  • Shrank WH et al. “Physicians’ Perceived Knowledge of and Responsibility for Managing Patients’ Out-of-Pocket Costs for Prescription Drugs.” The Annals of Pharmacotherapy: 2006 September, Volume 40. Published online at

Helen Osborne’s column appeared regularly in On Call. You can contact her by email at

Article reprinted with permission from On Call magazine and published by a division of Boston Globe Media.