A new report looking at the Oregon Medicaid program compares emergency room use between the uninsured and people with Medicaid – the healthcare program for primarily low income and disabled people.
And the report already has pundits worked up, especially with 9 million Americans projected to newly sign up for Medicaid this year under the Affordable Care Act.
The reason this is so hot – at least politically – is because the report over turns conventional healthcare thinking. Harvard health economist Amitabh Chandra describes the theory.
“If we insure the uninsured, they are not going to use the emergency room and they are going to use less healthcare. So in the long run, insuring the uninsured saves us money,” says Chandra.
Affordable Care Act advocates have used this argument to say insurance should be expanded.
There’s just one thing: that’s not what happens.
“Its basic economics that I would teach my students,” says MIT economist Amy Finkelstein – one of the report’s authors.
“When you lower the price of something, people buy more of it,” says Finkelstein. “That’s true of apples and bananas and it turns out it’s true of healthcare too.”
Finkelstein explains in Oregon the emergency room is free if you are enrolled in Medicaid. What she and her team found is that people on Medicaid use the emergency room 40 percent more than people without insurance. But it’s not just emergency room use that’s up.
Co-author Katherine Baicker says its primary care, preventative care, prescription drugs.
“That doesn’t mean that it’s inefficient, good or bad. It just means that insurance makes healthcare more affordable,” Baicker says. “And that has both financial consequences and health consequences.”
Based on this report, there are already estimates that increased ER use will cost taxpayers half a billion dollars a year. This is the very definition of a political football, which is why details in this report matter.
First, nearly 60 percent of all the people on Medicaid in the study didn’t go to the emergency room at all over 18 months.
Second, when people with private insurance were given more generous private health coverage they healthcare use went up, too. And perhaps most important, Harvard’s Amitabh Chandra says when it comes to money, this isn’t where the action is.
“The spending is not in the emergency room. The spending is on high cost patients. These are cancer patients. Many of them in the end of life,” he says.
The Oregon report found emergency room use accounted for between 10 and 15 percent of patient costs.
Chandra says it would be easy to use this report and argue that the Affordable Care Act is too costly.
He says the big question – the tough question – is how to limit the care everyone agrees is inefficient and expensive, regardless of who gets it or where that care is received.
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