Increased Hospital Use Following Medicaid Expansion is Mostly Temporary

The expansion of Medicaid to millions of uninsured new enrollees should not have the catastrophic impact predicted for the state budgets because the significant increases in hospital and emergency-room usage are only temporary, according to a new study by the UCLA Center for Health Policy Research.

“We found that the surge doesn’t last long once people get coverage,” said research analyst Nigel Lo, MA, the study’s lead author. “Our findings suggest that early and significant investments in infrastructure and in improving the process of care delivery can effectively address the pent-up demand for health care services of previously uninsured people. Fears that these new enrollees will overuse healthcare services are just not true.”

Using two years of claims data from 182,000 low-income, uninsured residents enrolled in California’s state-run programs, the UCLA team found that the group of people who previously had had the least medical care initially used hospital emergency rooms (ERs) at a high rate of 600 visits per 1,000. UCLA also found that their hospital admissions declined sharply, from 194 to 42, a decline of 78.5 percent.

The Affordable Care Act (ACA) has extended Medicaid eligibility in 27 states, but many other states have refused coverage because of predictions that state budgets will be overwhelmed by the pent-up demand of the previously uninsured, particularly when federal subsidies stop covering the full expansion cost in 2017. Three states –Indiana, Missouri, and Utah- are currently considering expansion, and other state legislatures will soon debate the issue.

The Obama administration is pushing states to expand Medicaid, arguing they are not only leaving millions of the residents uninsured, but are also forcing their hospitals to absorb billions of dollars in uncompensated costs for treating them.

“California’s success should set an example for states that are on the fence about expanding Medicaid,” said co-author Gerald F. Kominski, PhD, director of the UCLA Center for Health Policy Research. “It’s an investment: Build more infrastructure and care delivery early on, and you can manage chronic care, address unmet health care needs, and keep cost increases to a manageable level.”

The UCLA study looked at data from two programs in California- the Health Care Coverage Initiative, which ran from 2007 to 2010, and the Low Income Health Program (LIHP), which ran from 2011 to 2013. On Jan. 1, 2014, these enrollees became part of the 1.5 million Californians who were able to transition under the ACA into Medi-Cal, California’s Medicaid program.

The authors said that because California’s LIHP had provided preventative medical care and regular treatment for chronic diseases, the newly insured were no longer dependent on ER treatment and hospitalization because they had more accessible and less costly alternatives. Improving care delivery through the use of medical homes, care coordination and health risk assessments, as well as greater availability of specialty services and culturally competent self-care also potentially helped manage pent-up demand, they said.

The UCLA results provide new insights into previously published findings that costly ER visits in Oregon increased by 40 percent during the year after the state expanded Medicaid eligibility. By examining data over a longer period of time, the UCLA study was able to determine that such spikes in usage were only temporary.

The study was funded with support from California Department of Health Care Services and Blue Shield of California Foundation.