Joshua D. Gottlieb and Mark Shepard write,
many of the benefits of Medicaid go to medical providers who would otherwise provide uncompensated or unpaid care to the same people. In the absence of insurance coverage, hospitals still provide emergency care and lots of providers get stuck with unpaid debt, which ultimately amounts to free care. The ability to declare bankruptcy can serve as an implicit form of high-deductible insurance. Since third parties absorb some of the costs of medical care for the uninsured, people without insurance face diminished economic risk from adverse health shocks. A recent study finds that the cost of uncompensated care roughly accounts for the shortfall of enrollee value for Medicaid below program costs.
Pointer from Alex Tabarrok. My comments:
1. There are links in the paragraph to papers that document the claims that the authors make. I have not read those papers thoroughly, so I may be off base in some of the rest of my comments.
2. My understanding is that giving poor people health insurance does not do very much to reduce their use of the emergency room as their primary care source. Reducing emergency room visits was the hope of Romneycare (arguably a model for Obamacare), and it was not realized.
3. Uncompensated care is an alternative to Medicaid as a subsidy for poor people. However, I doubt that the authors are correct to imply that Medicaid is a transfer to health care providers. My guess is that health care providers, especially hospitals, shift the cost of uncompensated care to other patients. Note that the marginal cost of hospital treatment tends to be low relative to overhead cost, so that the prices charged to paying patients are always a huge markup over marginal cost (e.g., the $16 charge for a small carton of ordinary orange juice).
4. If I am correct about cost shifting, then increasing the share of poor people with insurance should enable hospitals to hold down prices. I doubt that we have seen much of an effect like this.
5. I have thought that uncompensated care is a relatively small part of overhead expense at most hospitals. But perhaps if I were on top of the literature my thinking would be different.
6. An alternative to Medicaid would be to have the government provide substantial funding to charitable organizations that provide health care to poor people. Perhaps if there were many charitable organizations in competition with one another, the best of them might find ways to get health care providers and their patients to utilize treatment more efficiently.