The Unintended Consequence of Expanding Medicaid
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The Fiscal Times
January 3, 2014

It has long been an axiom of policy experts and government officials that health care costs could be substantially reduced if poor people received adequate health insurance and no longer had to use hospital emergency rooms as their chief source of primary care.

According to one estimate, more than $18 billion could be saved annually if patients with routine or non-urgent medical problems turned to private physicians or preventative health care facilities for treatment instead of pricey ERs.

Related: Doctor Shortage Could Rise Under Medicaid Expansion

Yet a new study of the impact of Oregon’s expanded Medicaid coverage of the poor raises serious doubts about that assumption. The report, by a distinguished panel of academic and health care experts and published in the journal Science, found that extending Medicaid health insurance to uninsured low-income adults actually increased the use of hospital emergency rooms. 

According to the findings, overall emergency room use in Oregon increased by 0.41 visits per person or 40 percent relative to an average of 1.02 visits per person in a control group.

"We find increases in emergency department visits across a broad range of types of visits, conditions and subgroups for conditions that may be most readily treatable in primary care settings," the study stated.

The report was prepared by a team of researchers from Columbia University School of Social Work, the Harvard School of Public Health, the National Bureau of Economic Research, the Center for Outcomes Research and Education at the Providence Portland Medical Center, and the Department of Economics at the Massachusetts Institute of Technology. 

Related: The Hidden Costs of Rejecting Medicaid Expansion

The focus of the report was the effects of a novel 2008 Oregon state initiative that was designed to expand Medicaid coverage to 30,000 low-income people who won a lottery. However, the findings have much broader national implications in light of the major nationwide Medicaid expansion that began to take effect this week as part of the implementation of the Affordable Care Act. 

Twenty-five states and the District of Columbia so far have expanded Medicaid coverage to 3.9 million Americans with incomes below 138 percent of the federal poverty level who enrolled in the program during the past two to three months.

In touting the merits of the new Medicaid expansion, Obama administration and state officials have argued that expanding Medicaid would reduce inefficient and expensive use of emergency rooms. According to Kiplinger Personal Finance Magazine, the average in-network cost of an emergency room visit in 2011 for someone with private health insurance was about $933.

With much lower out of pocket costs under Medicaid, low income Americans would be more inclined to go to a private physician than turn to a hospital emergency room, some would argue. 

While that may ultimately prove to be the case, the study's authors said, "On the other hand, by reducing the cost to the patients of emergency department care, expanding Medicaid could increase use and total health care costs."

Related: States of Health: Winners & Losers in Medicaid

By law, hospitals have no choice but to treat patients who come to the emergency room, even if they are unable to pay. However, some hospitals are taking steps to dissuade the uninsured from using their emergency facilities.

In 2011, about 80,000 emergency-room patients at hospitals owned by HCA, the nation's largest for-profit hospital chain, left without treatment after being told they would have to pay $150 because they did not have a true emergency, according to Kaiser Health News.

Led by the Nashville-based HCA, a growing number of hospitals have implemented the pay-first policy in an effort to divert patients with routine illnesses from the ER after they undergo a federally required screening. At least half of all hospitals nationwide now charge upfront ER fees, according to the KHN report.

However, from a financial standpoint, hospitals could end up making more in revenue from their emergency room operations, if more of their low-income patients are covered by Medicaid.

In the case of Oregon, the study found that about 25,000 of the 30,000 lottery winners who qualified for Medicaid turned to a hospital emergency room over an 18-month period.

This article was updated at 11:15 a.m. on Friday, Jan. 3, 2014, to include a reference to the journal Science, where the Oregon Medicaid study originally appeared

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Washington Editor and D.C. Bureau Chief Eric Pianin is a veteran journalist who has covered the federal government, congressional budget and tax issues, and national politics. He spent over 25 years at The Washington Post.