Sunday, June 26, 2011

Avik Roy addresses the myth of the "Free Rider" health care problem.

  1. “Free-riding” is an artifact of clumsy government policy
  2. PPACA’s individual mandate overshoots the free-riding problem:
    Obamacare’s individual mandate doesn’t allow people to buy inexpensive insurance focused on emergency care: instead, it forces people to buy comprehensive insurance packages with a generous list of basic benefits, benefits far exceeding those required to address the issue of uncompensated emergency room care.

    You’re not going to the emergency room to get a mammogram. Hence, a significant portion of the individual mandate—the portion that requires people to buy insurance exceeding ER care—has nothing to do with the policy problem of uncompensated care.

  3. The individual mandate only somewhat reduces uncompensated care, at massive taxpayer cost
    Yes, Massachusetts has saved about $250 million in uncompensated care. On the other hand, in 2011, the state’s insurance subsidies will cost more than $830 million, and are growing at 5% a year.

  4. Uncompensated care is a small problem, relative to undercompensated care
    Because Medicaid dramatically underpays physicians for treating Medicaid patients—under 60 percent of what private insurance pays—very few physicians actually admit Medicaid patients into their practices. As a result, many Medicaid beneficiaries are forced to go to the ER to seek basic medical care. And Medicaid underpays hospitals just as it underpays doctors. Indeed, on average, hospitals lose money on every Medicaid patient they treat, receiving 88 Medicaid cents for every dollar of health costs.

    So hospitals are losing money, not because of uncompensated care due to EMTALA, but rather because of under-compensated care due to Medicaid and also Medicare.

  5. Mandates reduce access to emergency care for the most vulnerable
    between 2005 and 2007, Massachusetts ER visits rose by 7 percent, and the state’s costs of caring for ER patients rose 17 percent between 2007 and 2009.

    The uninsured don’t even account for their fair share of health expenditures. A Kaiser Family Foundation study found that, while the uninsured made up 15 percent of KFF’s surveyed population, the uninsured accounted for only 14 percent of total ER visits, and only 12 percent of aggregate ER expenditures.

    By contrast, Medicaid beneficiaries accounted for 9 percent of the population, but 15 percent of visits and 9 percent of expenses. (For those with private insurance, the stats were 60%, 47%, and 54% respectively; for Medicare beneficiaries, 14%, 20%, and 22%.)

    Why does this happen? It’s pretty simple: if your health care is paid for, you are more likely to see the doctor more, and consume more tests and procedures, than if you are uninsured. Hence, people with insurance consume, on average, twice as much health care as do the uninsured.

    This problem leads to more ER crowding, poorer access to emergency care for the truly vulnerable, and more losses for hospitals.

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