Insure Thy Neighbor

Continuing implementation of the Affordable Care Act (ACA) is predicted to reduce the nation’s uninsured population from approximately 53 million today to around 30 million in 2022, according to the Congressional Budget Office (CBO). New evidence from a study by N. Meltem Daysal in the Journal of Health Economics indicates that this increase in the insured population may bring more benefits than previously thought. In a study of California heart attack patients, Daysal found that a one standard deviation increase in the number of uninsured within a 10 or 20 mile radius of an urban or a rural hospital, respectively, increases the mortality rate for insured patients by three to four percent.

Panel data was collected for the study from California between 1999 and 2006. California was chosen as the setting due to its high uninsured rate (20 percent versus 17 percent national average 2004-2006) and the rich datasets provided by its Office of Statewide Health Planning and Development. Heart attacks are a relevant case study for several reasons. Heart attacks are a common cause of death in the US, they have high and increasing costs of treatment, the mortality rates for heat attack sufferers are associated with insufficient quality of care, and individuals experiencing heart attack symptoms are likely to go to the closest hospital.

Evidence shows that the increase in mortality for insured patients is most likely transmitted through the additional financial burden faced by hospitals treating uninsured patients. The Emergency Medical Treatment and Active Labor Act (EMTALA) requires hospitals that collect money from Medicare to provide screening and stabilization to all persons regardless of income or insurance status. It is difficult for hospitals to recoup the costs of care for these individuals. Uncompensated care costs in California were estimated at $5.1 billion in 2003 by Price Waterhouse Cooper. In line with this, the impact from the uninsured was larger for not-for-profit and public hospitals. These institutions are less likely to be able to absorb the costs of providing care for free.

Hospitals treating more uninsured patients do not hire additional cardiac staff to compensate for the increased demand for cardiac services. Since they know they will not receive payment, they optimize their hiring for a lower level of demand. The data show that hospitals in areas with a one standard deviation higher level of uninsurance employ fewer physicians, although this difference was not statistically significant. A one standard deviation increase in the uninsurance rate leads to a hospital being 0.071 percent less likely to have 24-hour physicians on premise, and employ 0.003 fewer cardiologists on average. This same one standard deviation increase in the uninsurance rate leads to a 0.40 percentage point increase in the number of gastrointestinal and respiratory tract intubations, a 0.49 percentage point increase in angiocardiography procedures, and a 0.27 percentage point increase in the number of puncture of vessel procedures. In other words, as hospitals are located in areas with higher uninsurance rates, they perform more procedures with the same number of staff.

The complex nature of healthcare creates difficulties in attributing any change to a specific factor. To control for bias, Daysal conducted several additional tests to control for increased mortality rates from factors such as:  low quality hospitals attracting more uninsured patients, high uninsurance rates restricting admissions to only the most at risk patients, ambulance diversion, high-risk patients transferring to high quality hospitals, and unobserved local shocks.

Since Congress is unlikely to change the mandate for hospitals to treat everyone, regardless of their ability to pay, the rate of uninsurance is likely to remain an issue even after the implementation of the ACA. In fact, reduced payouts from insurance corporations, Medicare, and Medicaid may exacerbate this problem in the future. If hospitals have less funding they may respond by hiring fewer doctors, which could hurt outcomes for patients. Still, expanding insurance coverage to more Americans is likely to help everyone in the system.

Feature Photo: cc/World Bank Photo Collection