One of the major goals of Obama’s 2010 Healthcare Reform Act was to “bend the cost curve” downward over time. The methods used to bring costs back down to earth include increasing the efficiency of the healthcare system, shifting the focus of the system to outcomes and patient health instead of the wasteful ‘fee-for-service’ model, and bringing those who previously did not have health coverage into the system, saving on the higher costs of taking care of the ‘indigent’ population, at higher cost.
Access to Health Care can Reduce Costs
In theory, covering the otherwise uninsured with government sponsored healthcare through Medicaid, the poor in our population will have access to ongoing preventative care, reducing their reliance on emergency rooms and inpatient care, which is expensive and not cost effective. It makes sense, but does this theory play out in practice?
New Study Looks at the Question
At the University of California-Irvine a new study tried to find an answer to at least part of this question. They focused their research on the comparison of health care costs over time for those newly covered by health insurance plans.
"In a case study involving low-income people enrolled in a community-based health insurance program, we found that use of primary care increased but use of emergency services fell, and over time total healthcare costs declined,"
says David Neumark, a professor of economics and director of UCI’s Center for Economics & Public Policy study.
It Is So Crazy It Just Might Work
The conclusion of this study was that the newly insured population did indeed have more primary care visits per year during the first year, which led to a concomitant decrease in emergency room visits from the first year of the study to the third year. This was considered a positive result and led to a decrease in overall cost. According to the study,
“these changes led to declines in cost per inpatient and outpatient visits and length of inpatient stays. Overall, these changes led to these newly insured individuals reducing their total healthcare costs from $8,899 per enrollee per year in year one to $4,569 in year three. This, in turn, had a positive impact on overall costs per enrollee per year for all participants in the plan with at least one year of enrollment. Those overall costs declined from $7,604 to $4,726.”
One aspect which should be considered is that the cost reductions only happen over a period of time, and the system must be willing to allow for that fact. In conclusion, “Expanding Medicaid coverage and subsidizing health insurance through the exchanges will not reduce system-wide health care costs right away, but this result does show some promise.”