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More Primary Care Doesn’t Necessarily Lower Hospital Use

By August 6, 2012Commentary

One theory for ensuring that all citizens have insurance coverage is that they will have better access to primary care, which will in turn keep them in better health and lessen the need for expensive services like hospitalization.  Nice theory, but new research based on the use of HRA’s published by the National Bureau of Economic Research suggests it may not work as hypothesized.   (NBER Report)   The authors used data from an HRA-type plan in which the HRA could be used for outpatient, but not inpatient, care to attempt to ascertain if there was a causal relationship between outpatient spending and hospitalizations.  The study looked at plans offered by one Midwestern insurance company, all sold on a total replacement basis and all having a high-deductible design with an HRA.  The policy years examined were 2000-2006 and the researchers focused on the effects that seemed to flow from changes in the value of the HRA.

The researchers found that both primary care use, specialty use and prescription use rose as more money was available in the HRA.  The primary care use may have led to much of the increase in specialty use.  More HRA funds also led to more hospitalizations–for every 4% increase in outpatient spending, there was a 4.6% increase in inpatient spending, and all of this increase occurred among preference-sensitive conditions.    The results suggest that providing insurance to everyone, especially if it is a relatively rich benefit, not like a CDHP, will result in both more outpatient and more inpatient savings.  Models of reform that assume greater insurance coverage leads to lower hospital and other spending are therefore seriously underestimating the real costs of the reform.  The results seem intuitively correct–both patients and providers will likely agree to more care when the patient has funds available to pay for it.  On the other hand, when patients are spending their own money, they use less care, hopefully only skipping not really necessary care.  The latter seems a better course for reform.

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