September 18, 2015

Health cost

Do emergency room medical costs of the uninsured affect the insured?

Trauma in the ER: Who pays for the uninsured? from the LA Times on 18 Jun 2012 describes how and why the federal Emergency Medical Treatment and Active Labor Act was passed in 1986. It requires hospitals to provide emergency room care regardless of the patient's ability to pay.

But the bills come due. And although emergency care accounts for a small fraction of total healthcare spending, many hospitals are feeling increasingly strained by the free care they provide.

Last year, MedStar Washington reported delivering $107.2 million in care for which it was not reimbursed. Nationwide, the total amount of uncompensated care provided to the uninsured reached an estimated $56 billion in 2008, according to one study.

Those costs have prompted financially strapped hospitals to rely on a complex system of shifting costs. Most of the burden falls on taxpayers, with the government providing tens of billions of dollars annually to help hospitals care for the uninsured. Privately insured Americans also pay a price as insurers raise premiums to reflect higher charges from hospitals. [ emphasis mine ]

In other words: the costs of emergency room use by the uninsured gets shifted to government-reimbursement (potentially raising taxes) and insurance company reimbursement (potentially raising individual coverage costs).

How much is emergency room spending compared to total health care spending?

Does emergency care account for just 2 percent of all health spending? from PolitiFact on 28 Oct 2013 examines what percent emergency room spending represents of total health care spending. In 2008 (the same year referenced in the LA Times story), total health care costs were $2.4 trillion. The PolitiFact article quotes two valid estimates of <2% and from 4.9 to 10%, pointing out that there are diverse metrics to use and no single calculation is definitive. These percentages represent costs from $48 billion to $240 billion. The LA Times story says uncompensated care was $56 billion in the same year. Compared to the emergency room estimates, this number suggests that it could represents emergency room plus elsewhere.

Has Obamacare reduced insurance premiums (by reducing un-reimbursed emergency room visits)?

Obamacare was signed into law in Mar 2010. Considering the many assumptions above: has the hospitals' burden been reduced in order to reduce the government's, taxpayers', and insurance companies' burden? And have insurance premiums changed for the larger pool of policy-holders? Patient Protection and Affordable Care Act > Impact > Public Policy > Effects on insurance premiums from Wikipedia provides CBO estimates pre-implementation from Dec 2009, along with Kaiser Family Foundation findings from Jun 2013. The definition of who will be affected and how is by the nature of the problem not straightforward, as is suggested by the opening sentence:

Several studies on insurance premiums expect that with the subsidies offered under the ACA, more people will pay less (than they did prior to the reforms) than those who will pay more, and that those premiums will be more stable (even in changing health circumstances) and transparent, due to the regulations on insurance.

For additional variables in the equations, we could look at whether the person is self-insured or employer-insured. Here are the CBO's estimates of percent cost increase by group:

  • Individuals (17% of the market): 10-13% increase, over half are eligible for subsidies
  • Small groups (13% of the market): 1% increase to 3% decrease; for those eligible for subsidies: 8-11% decrease
  • Large groups (70% of the market): up to 3% decrease; for high premium plans: 9-12% decrease

By Sep 2013, the actual premiums were better than predicted. The Jun 2013 Kaiser study found that for individuals purchasing their own insurance, Obamacare saved this group of consumers $1.2 billion in 2011 and $2.1 billion in 2012, reducing their 2012 costs by 7.5%. This does not immediately reconcile with the predicted 10-13% increase, but may be explained by the subsidies provided.

posted by sstrader at 10:39 AM in Culture & Society , Politics | permalink