Skip to main content

Getting Free Health Care Causes People to Use More Services (Duh)

By January 6, 2014Commentary

A huge Medicaid expansion was part of the mechanism to increase health insurance coverage under the reform law.  This expansion was sold in large part on the notion that if poorer people had better access to primary care they would not use the emergency room as much.  ER use is generally expensive and usually is less coordinated care.  Like most of the rationales for the reform law, this one had no evidence to support it.  Oregon had earlier expanded Medicaid coverage by allowing some previously non-eligible adults to enter a lottery and obtain coverage.  This expansion has provided an interesting natural experiment to test the effect of obtaining Medicaid coverage on utilization of various types of services, costs, and health, by comparing Medicaid eligible people who did and did not get coverage under the lottery system.  The news has been pretty much universally bad for proponents of the benefits of expanding Medicaid.  The most recent study, reported in Science magazine, finds that contrary to supporters’ claims, new Medicaid coverage seems to increase ER use.   (Science Article)

Since Medicaid basically is gold-plated coverage which allows people to get services with no cost-sharing, it is fundamentally obvious under general economic principles that since people don’t have to pay for health services they will use more of them, whether they need the services or not.  Utilization increased 40% at the ER, and over half the use was for visits that either could have treated in a regular outpatient setting or did not require immediate care.  And as would also be predicted, primary care use also increased, but apparently getting more primary care did not lead to less ER use.  At the same time, there was no physiologic improvement in health for these new Medicaid recipients.  The only apparent positive is that they reported feeling less depressed and less financially stressed.  Who wouldn’t if they were getting free health care.  So the big picture is that Medicaid coverage led to more utilization and more cost with no real benefit in terms of the person’s health.

Another important methodological result from the study is the comparison of self-reported utilization versus that obtained from examining actual claims or encounter data.  The respondents said they were not using the ER more, but the administrative data clearly shows that they were.  The same result was found for hospital use.  The study fortifies the extreme caution that should always be used in regard to self-reported data.  But the most unfortunate result of the study is the strong suggestion that the Medicaid expansion is going to cost much more than has been projected, as it results in unchecked utilization.  We have said before, and say again, that it is absurd to give people coverage which is far better than that enjoyed by anyone else, certainly far better than that for the hardworking taxpayers who are providing this free coverage.  Strong limits need to be placed on Medicaid coverage. The recipients should have to use community health centers unless they are not available.  And if they repeatedly misuse services, they should lose Medicaid eligibility.



Leave a comment