Aug 30 2013
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The ACA Helps Correct Incentives for Patients to Use the Health Care System Inefficiently

Sarah M. Miller is a Robert Wood Johnson Foundation (RWJF) Scholar in Health Policy Research (cohort 19). She has a PhD in economics from the University of Illinois at Urbana-Champaign. Her dissertation examines the effect of the 2006 Massachusetts health care reform on emergency room (ER) use. Miller will soon become an assistant professor of economics at the University of Notre Dame. Read all the blog posts in this series.

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The Emergency Medical Treatment and Active Labor Act (EMTALA) guaranteed all patients the right to receive urgent care in an emergency department regardless of their ability to pay. While the intent of the EMTALA was to ensure no patient was refused emergency care simply because they did not have health insurance, by covering only emergency department care, and not primary or preventive care, the EMTALA created incentives for patients to use the health care system inefficiently. These incentives may be especially salient for low-income or uninsured patients who have limited access to health services outside of emergency departments and community health centers.

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The law established that patients could always receive care in the emergency department even if they didn’t have the cash to pay upfront, or an insurance company picking up the tab, but the mandate did not extend to private physicians’ offices. Some state laws go so far as to dictate that uninsured patients can receive free care in the ER if they have sufficiently low incomes.

Although the EMTALA only requires hospitals to provide emergency care, it may be difficult to distinguish what visits truly constitute an emergency. Rather than be exposed to a lawsuit, many hospitals prefer to offer treatment to all who show up at the emergency department. This creates the incentive for some uninsured patients to use emergency departments for inappropriate, non-urgent care simply because they cannot be turned away. 

About 22 percent of ER visits of uninsured patients are classified as non-urgent.[1] ER visits for non-urgent care can raise wait times for other patients. Perhaps even more critically, use of ERs for non-urgent care raises the total cost of health care unnecessarily. Routine care provided in the ER is two to three times more expensive than the same care provided in an office setting.[2]

Expanding health insurance coverage to those currently uninsured may not only encourage them to get more timely care, but to seek care in more appropriate settings, improving the efficiency of the health care system as a whole.

Another way that expanding health insurance coverage could improve efficiency is by preventing medical emergencies before they occur. In 2011, the National Health Interview Survey found that one in three families with at least one uninsured member reported that they had to forego necessary medical care because of costs. For families where all members were insured, that number was only one in 13. Skipping or delaying important medical care may save a few dollars today but cost thousands months or years later. These costs also show up in the emergency department: 8 percent of ER visits are categorized as medical emergencies that might have been prevented with timely outpatient care.[1]

Finally, while the Affordable Care Act addresses the “demand” for preventive and primary care by increasing health insurance coverage, the “supply” of health services is also important. In a recent study, I found that the Massachusetts reform reduced the use of emergency departments for non-urgent care. However, I did not find any reduction for visits that occurred at odd hours, like over-night or on the weekend, where it might be difficult to find a health care provider to see you outside of the ER. Expanding “minute clinics” and liberalizing scope-of-practice laws can go a long way in making sure that enough health care providers are available to see the newly insured and to keep wait times down. For example, a study by researchers at the University of Hawaii and the University of Wisconsin at Madison found that allowing nurse practitioners to practice and prescribe drugs independently not only increased the amount of preventive care people received, it also reduced emergency department use.[3]

There are some ways in which expanding health insurance coverage may make the overall health care system less efficient—for example, by encouraging the over-use of ineffective types of care. However, on the important margins described in this post, correcting the incentives of patients will result in not only improved health and access to care, but better and more efficient use of the health care system as a whole. On these issues, the Affordable Care Act takes important steps toward better health care.

Learn more about the RWJF Scholars in Health Policy Research program.

[1] Miller, S. 2012. “The Effect of Insurance on Emergency Room Visits: An Analysis of the 2006 Massachusetts Health Reform.” Journal of Public Economics, 96(11):893-908.

[2] Bamezai, A., G. Melnick, and A. Nawathe. 2005. “The cost of an emergency department visit and its relationship to emergency department volume.” Annals of Emergency Medicine, 45(5): 483-490.

[3] Traczynski, J. and V. Udalova. 2013. “Nurse Practitioner Independence, Health Care Utilization, and Health Outcomes.” Working Paper.

Tags: Affordable Care Act (ACA), Health care delivery system, Emergency care, Human Capital, Scholars in Health Policy Research, Voices from the Field, Emergency Care