1) The paper analyzes how patient compliance with medication regimens (the input) affects health outcomes (the output) for diabetes patients based on health production function theory. 2) Studies show that high prescription co-pays reduce medication adherence and negatively impact health markers like blood glucose levels, leading to increased costs from complications. 3) For diabetes patients requiring multiple medications, high co-pays present a significant financial barrier, reducing compliance and resulting in worse health outcomes according to the studies.

1. Production Function 1
Production Function in Healthcare: An Analysis
Are the outcomes (output) of diabetes care determined by a person's compliance?
By Dr. Susan Dorfman, The University of Phoenix Online

2. Production Function 2
Introduction
The basis of this paper draws on the theory of health production functions and the
hypothesis that each person has control over his or her health outcomes through various
healthcare behavior choices. More specifically, the assumptions in paper were that the outcomes
(output) of diabetes care are determined by a person's compliance (input) to his or her medication
regiment. One key factor of compliance, as shown in the studies presented herein, are the costs
associated with compliance – primarily the cash payments (co-pays) that patients must pay for
every prescription. Of particular interest is the understanding of the health outputs provided in
the studies presented herein relate to the patient health input, which in this case is non-
compliance due to co-pay, and if and how they can be associated and applied to the production
function.
Analysis of Articles
A health production function relates physical inputs to physical outputs, where health is
an outcome produced by a number of varying inputs. One such input is patient compliance and
non-compliance, which in itself has a series of other inputs contributing to patient behaviors –
both good and bad.
Patient non-compliance has devastating consequences, such as causing. It is especially
revealing that estimates of the total annual healthcare costs in the U.S. resulting from patient
non-compliance vary from $100 billion to $170 billion to $300 billion. It has been shown that
that there is a link between increases in healthcare costs and low medication adherence in
patients who suffer from diabetes (Mahoney, 2005). Diabetes is a chronic disease, and patients
need to comply with medication regiments, be compliant with their doctor’s orders and refill

3. Production Function 3
their prescriptions for diabetes medications on a monthly basis. Due to co-morbid conditions that
exist such as blood pressure, kidney problems, depression and others, multiple medications may
be required to be taken regularly in addition to those that help treat diabetes. The implication of
these co-morbid conditions causes greater burden on out-of-pocket expenses for patients. “Direct
medical costs for diabetes and related complications are notoriously high” (Mahoney, 2005).
Evidence has shown that drug co-payment are adversely impacting adherence to a number of
desired healthy behaviors (Herman, 2006).
From the U.S. employers' perspective, the burden of diabetes brings with it an estimated
$40-billion annual cost for expenses related to the disease, including early death, work absence,
loss of a job and disability (Mahoney, 2005). Additionally, Mahoney (2005) believes that
absence from work and disability of patients with diabetes make up one-third of that employees
total cost to the company. Due to non-adherence, plan participants less then optimal refill rates
(nice or fewer) within a one year period were most likely to be considered a high-cost group.
Patient compliance with diabetes treatment has been shown to not only save lives, but also
healthcare dollars (Edlin, 2005). The lack of compliance to therapy has been recognized to
contribute to the complications associated with the disease (American Diabetes Association,
2005), with an estimated cost of $92 billion per year; which is triple the cost an average patient
(Mahoney, 2005).
The Findings and Implications on Health Production Outcomes
A health production function is a function that summarizes the conversion of health
inputs into health outputs. This paper was based on the theory of health production functions and
the hypothesis that each person has control over his or her health outcomes through various
healthcare behavior choices. More specifically, the assumptions in paper were that the outcomes

4. Production Function 4
(output) of diabetes care are determined by a person's compliance (input) to his or her medication
regiment. The findings from the articles presented demonstrate that the input of positive patient
compliance has direct impact into positive health outcomes and patient non-compliance has
direct input into negative health outcomes.
Literature exists (Mahoney, 2005) to support the fact that high co-pays are related to
patient non-compliance due to patients’ less-then-optimal use of necessary medications. A recent
study reviewed by Mahoney (2005), found that increasing the co-pay for “diabetes drugs led to a
23% decrease in per-member per-year drug days supplied.” Investing in aggressive diabetes
control model that factor in reductions in co-pays can help improve patient medication adherence
while also improving the glucose levels in the blood, reducing the costs and possible
complications associated with the disease, and increase productivity at work while lowering the
number of days employees are absent. This type of adherence has been shown to not only save
lives, but also healthcare dollars (Edlin, 2005).
Because diabetes is a chronic disease, patients need to comply with medication regiments
regularly. These patients must therefore adhere to their doctor’s instructions for care and refill

5. Production Function 5
their prescriptions for all necessary prescribed medications on a monthly basis. The conversion
of their health inputs directly relates into their health outputs, and many of these diabetes patients
must rely on several different medications to keep their condition under control. These
medications cost a great deal of money and even insurance drug plans are not effective enough in
reducing the cost of these medications because the co-pay is still prohibitive. As a result, many
diabetic patients do not take the medications as prescribed.
Diabetes is a chronic disease, and patients must comply with medication regiments and
refill their prescriptions for diabetes medications on a monthly basis. Due to co-morbid
conditions that exist such as blood pressure, kidney problems, depression and others, multiple
medications may be required an a monthly basis – causing greater burden on out-of-pocket
expenses for patients. While patient adherence and proper use of medications are necessary to
control diabetes and the lives of patients with the disease, the recent trends in pharmaceutical
benefit design within managed care have been to increase patient co-pays thereby passing on the
increasing costs of medications to their members in order minimize the visible growth of the
healthcare costs. In the cases presented, non-compliance, has been linked with a patient’s
inability to pay associated medication co-pays, and was directly related to negative patient
outcomes. Because today’s healthcare systems, techniques, and professionals are so complex and
interdependent, the impact of patient non-compliance should not only look at and analyze the
implications of compliance and it’s positive effect if implemented. In the cases described above,
negative health outputs were directly linked to negative patient health input. If this is not
managed, the high co-pays may become not only financial barriers but health barriers within
diabetes care (Mahoney, 2005) for many patients who have private employer-based insurance, as
financial and disease burdens will be caused by the lack of adherence to medications.

6. Production Function 6
Concluding Remarks
Patient compliance with diabetes treatment or the lack of it has been recognized to
contribute to the complications associated with the disease (American Diabetes Association,
2005), with an estimated cost of $92 billion per year; which is triple the cost an average patient
(Mahoney, 2005). As such, it can be concluded that the health outputs provided in the studies
presented herein relate to the patient health input. In the cases presented, non-compliance,
primarily due to inability to pay associated medication co-pays, was directly related to negative
patient outcomes. Because today’s healthcare systems, techniques, and professionals are so
complex and interdependent, the impact of patient non-compliance should not only look at and
analyze the implications of compliance and its positive effect if implemented. Additionally, our
society and the healthcare industry and nation as a whole should look at non-compliance and the
negative outcomes (outputs) and multipliers, some of which are obvious while others are
invisible, as those which can easily increase the potential costs for our nation and even our
universe.

7. Production Function 7
References
American Diabetes Association. (2005). “Third-party reimbursement for diabetes care, self-
management education, and supplies.” Diabetes Care, 28(supplement 1), S62-S63.
Centers for Disease Control and Prevention. (2005). National diabetes fact sheet. Available
online at: www.cdc.gov/diabetes/pubs/estimates.htm.
Edlin, M. (2005). “Complex issues of compliance continue to make an impact,” Managed
Healthcare Executive, Sept.
Herman, W. (2006). Can reduced co-pays boost outcomes, lower costs in diabetic patients?
Disease Management Advisor, 12(8): 94-95.
Mahoney, J.J (2005). “Reducing Patient Drug Acquisition Costs Can Lower Diabetes Health
Claims,” The American Journal of Managed Care, August: S170-S176.