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Expanding Health Insurance Coverage Should Reduce Costs

Posted by Mark Ryan, MD February 26, 2012 at 1:36 PM

Without significant changes, healthcare spending in the United States (already one of the highest rates in the world per capita) will continue to increase at an unsustainable rate (PDF).  One of the most important goals of the Patient Protection and Affordable Care Act (PPACA) is to control the costs of medical care.  Various analyses have discussed the PPACA’s potential to reduce healthcare utilization and costs, including this analysis of the law’s cost containment features (PDF) and this review of how the PPACA could bend the healthcare cost curve.

However, it can be argued that the key cost savings feature of the PPACA is also the law’s defining reform: the PPACA is expected to extend health insurance coverage to nearly 32 million currently uninsured Americans.  It can be argued that this expansion of coverage was the underlying crisis that drove the passage of this law, but whether or not expanding healthcare insurance access would reduce costs was unclear.

Now, a new study looks at the impact of extending healthcare access to individuals who previously lacked this access.    In November 2000, Virginia Commonwealth University (VCU) Medical Center launched a community-based coordinate care program in response to the health center’s role as a principle safety net provider in Richmond, Virginia.  Individuals under 200% of the federal poverty level who lacked any other coverage options were eligible for this program.  Once enrolled in the program, patients were assigned to a community-based primary care office and these primary care providers received a management fee and fee-for-service reimbursement that were equal to roughly 110% of Virginia’s Medicaid fee schedule.  This structure would be comparable to enrolling patients in programs that enhance primary care access through either private insurance or public insurance programs such as Medicaid–the two major approaches that the PPACA will take to expanding coverage.

Since this program was implemented, VCU Medical Center has seen a significant change in their system’s usage of high-cost services.  Primary care visits increased over the period when patients were enrolled in the program, while emergency department visits and inpatient admissions decreased during the same period.  This suggests that increased access to primary care services reduces the need for higher-cost emergency department and inpatient interventions.  The program also saw inpatient costs fall each year, and total average costs per year per employee fell nearly 50% (from $8,899 to $4,569).

The study’s authors conclude that “previously uninsured people may have fewer emergency department visits and lower costs after receiving coverage, but that it may take several years of coverage for substantive health care savings to occur.”  The authors also noted that there were larger cost savings were achieved in patients with more chronic conditions.  This conclusion aligns with prior research including this study, this study, and this article from Dr. Barbara Starfield (PDF).

This new article highlights two important considerations.  First: in the program this article describes, increasing individuals’ access to health care reduces the overall costs of care.  This has significant implications for national healthcare spending trends.  Second: as the US population increases its theoretical access to healthcare services, there will need to be primary care physicians available to care for them.  The PPACA includes plans to address this workforce need, but other healthcare system reforms (including payment reforms and graduate medical education training) will need to be enacted to meet its full potential.

As the PPACA approaches its second anniversary, and as it moves closer to full implementation in 2014, there is increasing evidence that the reforms embodied in the law will begin bending the cost curve of medical care.  This is of critical importance, especially as the political debate in Washington, DC focuses on budgets and deficits.  We must support and fully implement the PPACA to help address the nation’s fiscal security, as well as providing better and more effective care for our patients.

One Response to “Expanding Health Insurance Coverage Should Reduce Costs”

  1. […] is a modified version of a post initially published on the National Physicians Alliance website, February 26 […]

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