Joshua D. Gottlieb and Mark Shepard write,
many of the benefits of Medicaid go to medical providers who would otherwise provide uncompensated or unpaid care to the same people. In the absence of insurance coverage, hospitals still provide emergency care and lots of providers get stuck with unpaid debt, which ultimately amounts to free care. The ability to declare bankruptcy can serve as an implicit form of high-deductible insurance. Since third parties absorb some of the costs of medical care for the uninsured, people without insurance face diminished economic risk from adverse health shocks. A recent study finds that the cost of uncompensated care roughly accounts for the shortfall of enrollee value for Medicaid below program costs.
Pointer from Alex Tabarrok. My comments:
1. There are links in the paragraph to papers that document the claims that the authors make. I have not read those papers thoroughly, so I may be off base in some of the rest of my comments.
2. My understanding is that giving poor people health insurance does not do very much to reduce their use of the emergency room as their primary care source. Reducing emergency room visits was the hope of Romneycare (arguably a model for Obamacare), and it was not realized.
3. Uncompensated care is an alternative to Medicaid as a subsidy for poor people. However, I doubt that the authors are correct to imply that Medicaid is a transfer to health care providers. My guess is that health care providers, especially hospitals, shift the cost of uncompensated care to other patients. Note that the marginal cost of hospital treatment tends to be low relative to overhead cost, so that the prices charged to paying patients are always a huge markup over marginal cost (e.g., the $16 charge for a small carton of ordinary orange juice).
4. If I am correct about cost shifting, then increasing the share of poor people with insurance should enable hospitals to hold down prices. I doubt that we have seen much of an effect like this.
5. I have thought that uncompensated care is a relatively small part of overhead expense at most hospitals. But perhaps if I were on top of the literature my thinking would be different.
6. An alternative to Medicaid would be to have the government provide substantial funding to charitable organizations that provide health care to poor people. Perhaps if there were many charitable organizations in competition with one another, the best of them might find ways to get health care providers and their patients to utilize treatment more efficiently.
Perhaps if there were many charitable organizations in competition with one another, the best of them might find ways to get health care providers and their patients to utilize treatment more efficiently.
No the charitable organizations will be competition for donors and offer only care to make donors feel good about themselves. So charities will raise money for extreme cases like the British Charlie Gard and not say reasonable care rural clinics in Kentucky.
#4: kind of assumes a competitive market for acute care services in which there are incentives for holding down costs/prices. I don’t think those incentives really exist in most of the country, particularly in small towns where there’s one community hospital and the next nearest one isn’t in the same county.
#5: It varies substantially from state to state. Almost every Medicaid agency has some sort of program to help offset uncompensated care costs (google Disproportionate Share Program), but they vary widely in funding levels, so that in some states uncompensated care costs are rather small, in others they’re fairly large. So for example, South Carolina spends about half a billion dollars a year in Disproportionate Share funds, while West Virginia spends less than $100 million. As a result, uncompensated care costs tend to be substantially greater for hospitals in West Virginia as a percentage of overall operating costs.
I was listening to an NPR story–or maybe it was PBS NewsHour–on the radio, and they were focusing on a corner of southwestern VA, where everyone was out of work. A woman was talking about her $800/month, which barely covered rent and utilities, and then having to choose between food and medicine. The implication was that the town had many of these people.
And I couldn’t understand why no one was saying “Good lord, what do these people need insurance for?” They need medical care. People are just calling for insurance as the way to transfer money from the feds to the providers. That makes no sense. Set up clinics in poor communities. Start a waiting list for unreimbursed surgeries that operates like organ donor lists. In other words, stop the nonsense of Medicaid, and just give the people basic medical care–and try to do it without making the opioid epidemic worse.
But for god’s sake, it’s offensive to discuss insurance as a solution for people whose net income will never come close to the reasonable cost of insuring them.
Like I said, centralization narratives interspersed with local color.
Anyway, insurance is a pile of money and libs can smell that for miles and miles.
So, to them, access, insurance, and entitlement all mean the same thing.
“My understanding is that giving poor people health insurance does not do very much to reduce their use of the emergency room as their primary care source.”
I am shocked, shocked I say, that giving people financial assistance for medical treatment results in an increase in medical treatment. Regardless of the provider.
A few points:
–It was always a lie that more insured would lower ER visits. Same as the lie that preventative medicine saves money. It was Obama et al who intentionally deceived here.
–The govt (taxpayer) still pays for uncompensated care (at least about 2/3 of it). Uncompensated care runs about $80-90 billion annually.
–OMG lol EMichael is here! I thought of you Thoma guys when Trump was elected! How’s the golf game!?
I would rather have hot nails driven through my eyes than converse with you. Not a big fan of people who post in others names, as caused your banning from Dr. Thoma’s site.
Meanwhile, I see you still have the same writer’s voice. Post a couple of true statements and then claim they mean something. The intellectual level of Inhofe’s snowball.
It’s good to re-connect with you too Michael. Be well and best regards to the Thoma cohort. Stay insulated!
Another one of your impeccably reasoned rebuttals.
Given time, I think it would reduce emergency room use, which might be argued undermines your trolling point.
Well, I was likewise told that give time, PPACA was gonna be Aces! Instead it turned out to be the most corrupt and mystical legislation of my lifetime.
So forgive my cynicism.
you seem to be commenting on something other than what you quoted, because your comment doesn’t make sense in the context of the quote. Insurance was supposed to divert people from using g the ER for non-emergency care. That has nothing to do with how much medical care they’re procuring.
Well, to be charitable, we can just say, “oh yeah, of course they were lying about that” and then skip to the good stuff.
The good stuff being, sure in-kind subsidies increase usage and costs, not sure if that is something to crow about, especially considering they denied it and lied in the grease job.
Some disconnected thoughts.
On #3.
(a) In general commercial patients cross-subsidize gov’t patient (Medicare and Medicaid). Jeff R’s pointer to DSH payments helps with Medicaid, but even with that it doesn’t cover fully-loaded cost of care.
(b) There are a lot of fixed costs in the provider sector, but margins are small. So if 25% of your payer mix is Medicaid and reimbursing at 70% of fully allocated costs, you’re going to have a tough time of it.
On #5, Jeff R’s location point, and (b) above. Health services are really local. Community hospital in an affluent neighborhood? Not much uncompensated care so not really an issue. Safety net hospital in a poor urban setting? Major uncompensated care issue. Large urban academic? Bit of a mix and depends on where it’s pulling from.
Commercial > Medicare > Medicaid > Uncompensated. So it’s worthwhile for providers to invest resources to get a patient undergoing an expensive treatment onto Medicare (vs. uncompensated).
Not sure I follow #4. Hospitals are price takers for government patients. A safety net hospital with a major uncompensated care problem is less likely to have enough negotiating power to push on commercial rates. They may get some help from local/state governments. But I don’t see a strong cost management mechanism.
EMTALA requires hospitals to stabilize/admit patients regardless of ability to pay. Which influences the marginal impact of Medicaid and (mandated) uncompensated care.
Another alternative to Medicaid (and Medicare) would be to stop treating gunshot wounds, hip replacements, chronic diabetes care, cancer, and Alzheimer’s with the same ‘system’. Acute vs. chronic and emergency vs. planned are very different from a patient decision making perspective. But we bundle them all under ‘health insurance’
Charges != cost. That $16 OJ carton is a red herring. Do bills go out with that on there? Yes. Does anyone actually pay it? No. (Is it a stupid system? Yes.)
The real savings is in avoided and lowered frequency of admittance, something that will only show in the fullness of time. It has reduced the rate of increase, but less than it could have since reimbursements were cut to pay for it. This meant no decline but a slowing of increase. The sabotage techniques have thwarted this which is why we are seeing fewer options and greater increases now. Uninsured were reaching 18% and now are down to half that in the best performing states, but when costs are driven by those with extraordinary costs and those would have been treated anyway, it hasn’t been a huge factor. Again it is the avoided and lower frequency as they get the needed care before catastrophe happens that is the most important.
There’s a lot more going on emergency room visits, and a closer look would reveal why they are so hard to bring down.
As an anecdotal example: the last time I brought someone to an emergency room, it was very late at night, and while waiting, I tried to strike up a conversation with the man next to me, which was challenging due to the language barrier. He had brought in his kid who was sick with the flu. Some emergency.
But the man couldn’t take off during the day, and the value of his time was low, so he could just hang around for hours, like people who can afford to loiter and circle forever trying to get a parking spot. If he wanted to get the effective relief children’s medication by prescription – the only legal manner – and as soon as the kid was sick, this was the only way. Try to get a pediatrician appointment same-day at 11pm.
Otherwise, even during normal business hours, no one would see him for days, when the flu would have already run its course (which is not a bad way to try and “save” on expenditures for normal people.) This gave me the impression he already had Medicaid or some other kind of insurance or access, but that the private urgent clinics – maybe in copay form – would cost more than the emergency room visit, which he expected to be free (to him). I don’t know if he had legal status, but his son probably did.
Now, it’s easy for someone to look at the situation and see all kinds of possibilities for ameliorative reforms. I can just imagine Tabarrok applying a dozen insights from textbook economics and offering many libertarian / free-market suggestions.
But wonky discussions of this problem tend to operate as if one must simply presume all those options to be completely off the table, and indeed, much of the entire discussion to be off limits. That’s one reason why these conversations never seem to go anywhere; every time the subject comes up it is like starting over from scratch, with people repeating the same things over and over.
This is the “policy solutions” analogue to the drunk looking for his keys under the street lamp because that’s where the light is. In this case, it’s like looking for Kim’s secret treasure south of the fence, when everyone knows it’s buried deep inside the DMZ. “Why in the world are you digging here?” – “Oh, because this is where the landmines aren’t.”
Mandatory emergency care insurance is fine, although I could come up with a baker’s dozen better alternatives before lunch.
Most of our problems result from not thinking clearly and being confused by semantics.
For example, having to provide emergency care is not far off from regulations requiring people to bake wedding cakes. It’s just another regulation for the privilege of being allowed to do business.
Also, the layman assumes people are denied “access.” I would assume a hospital administrator would say differently. Aren’t “uncompensated” treatments a tax writeoff?
This is of course part of the plan to cover the poor, they simply go to the back of the line and help with demand smoothing.
EMTALA requires treatment for anyone that presents at an ED. Regardless of ability to pay. Other types of access (drugs, outpatient treatment) may be sketchy, but inpatient access is available.
Many (most?) hospitals are non-profit. So no tax.
Can’t concur with the ‘demand-smoothing’ comment. Lots of reasons (preference to treat patients similarly, differing requirements for patients with psychosocial issues…more prevalent in uncompensated populations, etc).
I must be dense because I don’t understand this statement: “…have the government provide substantial funding to charitable organizations that provide health care to poor people. Perhaps if there were many charitable organizations in competition with one another, the best of them might find ways to get health care providers and their patients to utilize treatment more efficiently.”
I was under the impression that charitable organizations providing care to poor people is the way it used to be done — that that was the original method of doing so on a larger scale than a country doctor treating people for chickens or … nothing. See, for example, the Mary Free Bed Rehabilitation Hospital in Grand Rapids MI.
http://www.maryfreebed.com/about-us/history/
And, IIRC, religious- and community-affiliated hospitals used to treat the indigent, funded by contributions from their members (and others.) Unfortunately, religious hospitals have recently been under fire for their refusal to perform certain non-emergency procedures that violate their religious tenets.
It seems to me that a charitable [health care] organization is already accountable to its donors to provide services in the most efficient and effective manner: after all, the donors are giving their own money to the cause & should have high expectations for how its employed. If your e- and U.S. mail boxes haven’t been inundated these last few years by charitable organizations’ solicitations, then you must not donate to anyone, and are therefore unaware of exactly how competitive they are for donors. That’s about all I get in my U.S. mail box anymore.
Why on earth should government funding be any part of it?
Besides, (a) government already subsidizes charitable organizations via 501(c)(3) tax exemption for related income, as well as availability for tax deduction of donor contributions; and (b) government money always comes with strings, restrictions, preferences, biases, and bureaucratic obligations. Why would any effective charitable organization opt in? Consequence: government money would probably go to the UNeffective and INefficient organizations who can’t attract VOLUNTARY donations.
Interesting that there has been no comment on the simple fact that the slight increase in emergency room visits does not mean that there has been an increase in the use of the emergency room for primary care, nor does it mean there has been an increase in the amount of uncompensated care.
This is not hard to understand.
If you want to talk about the increase of the ER as primary care and the increase in uncompensated care, you need to show increases in those areas. Increased ER visits ain’t it.
Y’know, something like this (except the opposite)
Issue: By increasing health insurance coverage, the Affordable Care Act’s Medicaid eligibility expansion was also expected to lessen the uncompensated care burden on hospitals. The expansion currently faces an uncertain future.
Goal: To compare the change in hospitals’ uncompensated care burden in the 31 states (plus the District of Columbia) that chose to expand Medicaid to the changes in states that did not, and to estimate how these expenses would be affected by repeal or further expansion.
Methods: Analysis of uncompensated care data from Medicare Hospital Cost Reports from 2011 to 2015.
Findings and Conclusions: Uncompensated care burdens fell sharply in expansion states between 2013 and 2015, from 3.9 percent to 2.3 percent of operating costs. Estimated savings across all hospitals in Medicaid expansion states totaled $6.2 billion. The largest reductions in uncompensated care were found for hospitals in expansion states that care for the highest proportion of low-income and uninsured patients. Legislation that scales back or eliminates Medicaid expansion is likely to expose these safety-net hospitals to large cost increases. Conversely, if the 19 states that chose not to expand Medicaid were to adopt expansion, their uncompensated care costs also would decrease by an estimated $6.2 billion.
http://www.commonwealthfund.org/publications/issue-briefs/2017/may/aca-medicaid-expansion-hospital-uncompensated-care
You’d have to adjust for the increase in bad debt from patients that were on commercial plans and moved to Exchange plans with higher deducible.
You’d also have to adjust for lower reimbursement rates on exchange plans vs. commercial for small employers that dropped plans.
I could see it being a net win for safety net hospitals. Likely marginal or no impact for others.
It is adjusted, by states that expanded Medicaid.
“Uncompensated care burdens fell sharply in expansion states between 2013 and 2015, from 3.9 percent to 2.3 percent of operating costs.”
I mean seriously, you cannot expect hospitals that had no serious uncompensated care problems to see a reduction in uncompensated care problems.
Let me try again:
Population 1: 3% of the population. Previously uncompensated care. Revenue from this segment increases $3M.
Population 2: 2% of population. Previously commercial, now exchange plans. Lower rates of payment and higher bad debt on patient co-pays that go unpaid. Revenue declines $2M from those two effects.
If they’re only looking at population 1 and not adjusting for 2 they’re not getting the full net impact.
Let me know when you find anything at all about population 2 that shows any effect.
Try talking to a hospital CFO. That’s what I did.
One?
I did not write this post, nor did I write the column it linked to. If a case is trying to be made, it should be made with as much proof as can be found, as opposed to saying a, b, c, and thinking it means anything.
“…..slight increase in ER visits”. Ummmmm, no. Major increases in visits post obtaining insurance. From the best study out there on this:
“A key finding was that Medicaid increased emergency department (ED) visits by 40% in the first 15 months after people won the lottery.”
http://www.nejm.org/doi/full/10.1056/NEJMp1609533#article
Obama that tricky trickster. He lied through his teeth on this one. And other true believers spread those lies.
Yep.
Oregon.
Same old, same old from you.
Is Florida the only place that levies a property tax for “indigent care”? It is on a county by county basis. It is supposed to provide funding for one hospital system per county to which uninsured are admitted.
Re: the gentleman who preferred not to take off work to take his child in – if he indeed had some type of insurance – such as Kidcare in Florida and several other states, why did he not go to one of the Urgent Care centers now springing up everywhere. Medicaid for kids and Kidcare cover these as well as hospitals. One issue in Florida is that a large part of the covered population swing back and forth between the two systems for reasons not apparent to the parents so they show up in the Emergency room uncovered because the parent’s income has fluctuated and the paperwork is delayed or ignored. My guess is that the Medicaid expansion has lowered costs largely because somebody is now looking at the problem.
If he was diligent and made good financial decisions he likely wouldn’t be on Medicaid…
That’s a silly comment. Apparently you’re not well acquainted with the Medicaid population. Many work as hard or harder than you, I’ll wager. You have time to opine on the internet during the day.
“Diligence” and “decisions” aren’t the key to the kingdom.
Yeah, life is much easier since I got out of consulting. Don’t miss 70 hour weeks.