“Everyone Else Ends up Paying the Price”

“When someone without health coverage gets urgent—often expensive—medical care but doesn’t pay the bill, everyone else ends up paying the price.”

This quote reflects the idea that hospitals that provide high levels of uncompensated care to uninsured patients must defray these costs. Many of these hospitals are granted federal Disproportionate Share Hospital (DSH) payments, but it is often inadequate to offset the full extent of lost revenue. In response, hospitals may provide differential treatment by insurance status, recommending more expensive treatment to those with insurance. This is known as the “spillover effect.”  They may also use “cost shifting,” charging insured patients more for treatment in response to a lack of payment from uninsured patients.

Evidence to support this notion has been limited and conflicting. It is, however, thought to occur more commonly in the emergency department, which accepts all patients regardless of insurance status and absorbs large levels of uncompensated care.

This study examined the association between uninsurance rate per county and the average amount paid for emergency department visits from 2009-2013. The authors found that an increase of 1% in county uninsurance rate was associated with a $20 increase in average emergency department payment for those with private insurance. Increased costs were not seen for public insurance plans.

The study provides evidence that the “spillover effect” due to high uninsurance levels can lead to increased healthcare costs for those with private insurance. Notably, this study used data from 2009-2013, before many of the provisions of the ACA went into effect in 2014. The full implementation of the ACA has reduced uninsurance by 18.1 million Americans. It has also reduced uncompensated care by 4.1% in states that expanded Medicaid.

In anticipation of increased levels of insurance and decreased uncompensated care, the ACA reduces federal DSH payments by 41% by 2020. However, reductions in uncompensated care may not be enough to offset the loss of DSH payments. Furthermore, efforts to dismantle portions of the ACA leaves the coverage status for millions of newly insured Americans in question.

Repealing the ACA without restoration of DSH payments would be a major blow to hospitals and could lead to further increased costs for privately insured patients. Any future healthcare reforms efforts must seek to maintain current levels of insurance. If not, we may all find ourselves paying the price.

This Health Policy Journal Club review is a collaboration between Policy Prescriptions® and the Emergency Medicine Residents’ Association. It is written by Elizabeth Sherrill. She is a third year medical student at Vanderbilt University School of Medicine.

Abstract

OBJECTIVE: To investigate the relationship between the percent uninsured in a county and expenditures associated with the typical emergency department visit.

DATA SOURCES:  The Medical Expenditure Panel Survey linked to county-level data from the American Community Survey, the Healthcare Cost and Utilization Project, and the Area Health Resources Files.

STUDY DESIGN: We use a nationally representative sample of emergency department visits that took place between 2009 and 2013 to estimate the association between the percent uninsured in counties and the amount paid for a typical visit. Final estimates come from a diagnosis-level fixed-effects model, with additional controls for a wide variety of visit, individual, and county characteristics.

PRINCIPAL FINDINGS: Among those with private insurance, we find that an increase of 1 percentage point in the county uninsurance rate is associated with a $20 increase in the mean emergency department payment. No such association is observed among visits covered by other insurance types.

CONCLUSIONS: Results provide tentative evidence that the costs associated with high uninsurance rates spill over to those with insurance, but future research needs to replicate these findings with longitudinal data and methods before drawing causal conclusions. Recent data on changes in area uninsurance rates following the ACA’s insurance expansions and subsequent changes in emergency department expenditures afford a valuable opportunity to do this.

Kirby JB and Cohen JW. Health Serv Res. 2017 Feb 7; epub. PMID: 28176307