The debate about health care reform has long been fraught with persistent myths and inaccurate claims. Here’s another one to add to the list: Obamacare will reduce health care costs over time by reducing the number of costly trips to hospital emergency rooms.
If you’ve been following the debate for any length of time, you’ve heard this prediction. Unfortunately, it is logically confused and empirically unlikely.
It’s certainly true that the cost of treating non-emergency conditions in the ER tends to be much higher than the cost of treating the same conditions in some other setting. The theory is that because uninsured people go to ERs because they know the hospital has to accept them, regardless of ability to pay, giving them Medicaid or private health insurance will reduce their trips to the ER.
The theory has several holes. One has to do with induced demand. Yes, there are uninsured people who go to ERs and don’t pay their bills. But there are other uninsured people who don’t go to ERs because they expect to be billed and the problem they are having is relatively mild, such as a head cold or a twisted ankle. They buy over-the-counter treatments and tough it out. If you give these individuals health insurance, particularly Medicaid or other coverage with very little out-of-pocket cost to them, that lowers their disincentive to go to the ER.
Another hole has to do with differences in opportunity cost. While going to the doctor is a less-expensive option for third-party payers, it can be the more expensive option for patients – if you are measuring expense in both dollars and time. Some people work shifts that make it difficult to take time off for a doctor’s visit for a non-emergency condition. The ER is always open. For other people who don’t work, the time spent waiting at the ER is not very costly to them.
Yet another hole in the theory is the assumption that giving patients Medicaid will necessarily increase their access to physicians. Because of reimbursement rates, billing delays, and other factors, some practices don’t take Medicaid patients. Moreover, at least in the short run Obamacare is going to induce a lot of new demand for medical services that cannot be supplied at the current staffing levels of health providers. Waiting times at physician offices will likely increase. Motivated patients, or those facing low opportunity costs, will still find ERs to be an attractive alternative.
The biggest problem with the Obamacare/ER theory is that it is testable – and empirically false. We already know from past Medicaid expansions, and from the Massachusetts health reforms that influenced the design of Obamacare, that ER visits don’t fall when previously uninsured people obtained health plans. More often, ER visits rise.
Indeed, a simple perusal of the data shows that Medicaid patients use ERs far more than either privately insured or uninsured people do. Moreover, if you adjust for health status, the privately insured and the uninsured have roughly identical rates of ER usage.
If your goal is to get more people to seek medical care, then Obamacare may well do the trick for you. If your goal is to get more people to consult physicians or self-medicate rather than make expensive trips to the emergency room, Obamacare won’t help and will likely make your goal harder to achieve. And if your goal is to give patients and providers better incentives to get health care costs under control, alternatives to Obamacare remain your best bet.
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Hood is president of the John Locke Foundation and author of Our Best Foot Forward: An Investment Strategy for North Carolina’s Economic Recovery, published by JLF in 2012.