For years, it has been the number one talking point of Obamacare supporters. People who are uninsured end up getting costly care from hospitals’ emergency rooms. “Those of us with health insurance are also paying a hidden and growing tax for those without it—about $1,000 per year that pays for [the uninsureds’] emergency room and charitable care,” said President Obama in 2009. Obamacare, the President told us, would solve that problem by covering the uninsured, thereby driving premiums down. A new study, published in the journal Science, definitively reaches the opposite conclusion. In Oregon, people who gained coverage through Medicaid used the emergency room 40 percent more than those who were uninsured.
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The “free rider” argument was always bunk
Just like the “if you like your plan, you can keep your plan” promise, the promise that Obamacare would make health care less expensive by expanding coverage was always a crock. Nationally, it’s estimated that we spend about $50 billion a year on uncompensated care for the uninsured. But Obamacare spends $250 billion a year of taxpayer money on covering the uninsured. Only in Washington is spending $250 billion to address a $50 billion problem considered “savings.”
In Massachusetts, under Romneycare, the math worked out in a similar way. The Bay State spent $661 million on uncompensated care in the year before Romneycare went into effect; by the 2009 fiscal year, that figure had decreased to $414 million: a savings of $247 million. But in 2011, the cost of the state’s insurance subsidy program was $830 million, and that doesn’t even count the tab paid by the federal government for the state’s expansion of Medicaid.
Did emergency-room usage in Massachusetts decline because of all this extra money? The opposite. ER visits actually rose by 7 percent between 2005 and 2007, and the state’s costs for caring for ER patients rose 17 percent between 2007 and 2009.
And one of the big holes in the myth of uninsured “free riders” is that the uninsured only account for 15 percent of the population, 14 percent of total ER visits, and 12 percent of aggregate ER expenditures, according to a study by the Kaiser Family Foundation. Medicaid beneficiaries, by contrast, accounted for 9 percent of the population, 15 percent of visits, and 9 percent of expenses.
Given all of this data and experience, it was obvious that expanding coverage through Obamacare would increase taxpayer costs, not reduce them. But predictably, the pro-Obamacare “fact-checkers,” like those at PolitiFact, have been nowhere to be found.
The latest data from the Oregon Medicaid experiment
Along come economists Amy Finkelstein of MIT and Kate Baicker of Harvard, who have been participating in the now-famous Oregon Medicaid experiment. Regular readers of The Apothecary will recall that this study compared a group of Oregonians who were uninsured, and stayed that way, to a group who had “won” a lottery to enroll in Medicaid. The study found that Medicaid “generated no significant improvement in measured physical health outcomes,” a finding that reinforces extensive published research. (I also discuss this research in my new book, How Medicaid Fails The Poor.)
Finkelstein and Baicker, in their new Science article, looked at records for 24,646 residents of the Portland, Oregon area who had participated in the Medicaid experiment. They found, as they had previously, that the subgroup that had gained coverage under Medicaid showed no improvement in the management of their chronic medical problems, such as high cholesterol, high blood pressure, and diabetes.
They also found that those on Medicaid used the emergency room 40 percent more than the uninsured did—1.43 ER visits per Medicaid enrollee, as against 1.02 for the uninsured. More to the point, a majority of the emergency room visits were unnecessary, because they involved conditions that could easily have been managed outside of the ER.
Of the 0.41-per-person increase in visits, 0.18 were “primary care treatable,” meaning they didn’t require ER care. 0.12 didn’t even qualify as emergency care. 0.04 did qualify as emergency issues, but could have been prevented by adequate primary care. The Medicaid-driven increases in each of these categories was statistically significant, meaning that the differences were large enough that they are highly unlikely to be statistical noise.
Medicaid is, in effect, designed to increase emergency-room usage
Why does Medicaid perform so poorly, given that we spend so much money on it—$450 billion a year? Because of fundamental flaws in the way the program was designed.
The authors of the 1965 Medicaid legislation believed that it was morally wrong to expect poor people to pay even modest sums for their own health care. So the law mandates that cost-sharing features, like co-pays, of Medicaid plans must be minimal to zero for both primary care coverage and emergency-room usage.
Because Medicaid was nearly free to the program’s enrollees, those enrollees ended up seeking—and receiving—lots of inappropriate care. That led to massive cost overruns that, even today, are bankrupting state governments. But states have had little flexibility to reform Medicaid’s cost-sharing features. The one thing they have been able to do is pay doctors and hospitals less and less to provide the same care.
That trend, in turn, has led many doctors to stop accepting new Medicaid patients. So it’s extremely difficult for Medicaid enrollees to get appointments with primary care physicians. They have to spend weeks on the phone to find someone who will treat them.
Put yourself in the shoes of that Medicaid enrollee. Why would you bother calling primary care docs all day and all week, if you can go to the emergency room and get the same care for the same price? So that’s what Medicaid patients do.
And then, consider that Medicaid pays hospitals far less than private insurers pay for the same care. Many hospitals say that they lose money on every Medicaid patient they see. But somehow, if we have more Medicaid patients, taxpayers will be better off?
It was bunk in 2009, and it’s bunk today. It’s why the states that have chosen to forego Obamacare’s Medicaid expansion were wise to do so. Governors and legislators who have ignored the data, and burdened generations of future taxpayers with this failed program, have a lot of explaining to do.
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INVESTORS’ NOTE: Among the biggest publicly-traded players in Obamacare’s expansion of Medicaid are Molina (NYSE:MOH), WellPoint (NYSE:WLP), WellCare (NYSE:WCG), Centene (NYSE:CNC), and Humana (NYSE:HUM).
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