New study shows how Medicaid fails the poor, and why Obamacare will fail the middle class

By Scott Gottlieb, AEI

People enrolled in Medicaid are significantly more likely to end up in the emergency room than their uninsured counterparts. So says a new study published in the journal Science that’s being cited as evidence of how Medicaid fails to provide adequate access to basic care that would reduce morbidity, and the need for people to visit the ER.

This may be part of the story.

But the data reveals deeper truths about the challenges of providing adequate access to medical care, especially for the poor.

The research examines emergency room records for roughly 25,000 people over 18 months. It found that adults who are covered by Medicaid use emergency rooms 40% more than those in similar circumstances who do not have health insurance. Having Medicaid consistently increased visits to the ER across a range of demographic groups, types of visits, and medical conditions, including types of conditions that may be most readily treatable in primary-care situations. The authors said that in no case were they able to find any subpopulations, or conditions, for which Medicaid caused a noteworthy decrease in ER use.

There’s now a voluminous body of clinical literature showing that access to Medicaid alone doesn’t improve (and can worsen) medical outcomes. Boosters of Medicaid dismiss much of this literature, arguing that the research can’t control for all the socioeconomic factors that contribute to bad medical outcomes among the poor. But the sheer volume of literature is becoming hard to ignore. So are the results of the latest study of ER visits.

That’s because thus study was the result of a unique circumstance of the Oregon Medicaid program. In 2008, Oregon obtained Medicaid funds for about 10,000 additional low-income adults. But 90,000 Oregonians applied for the coverage. So state officials developed a lottery as the fairest way to fill those 10,000 slots.

The latest study is the result of ongoing research that’s comparing the winners who gained coverage with those who applied but remain on a waiting list. These kinds of rigorous experiments, with large randomized groups, are rare when it comes to healthcare services, and comparing insurance schemes.

An earlier analysis of the Oregon dataset, published last May in the New England Journal of Medicine, found that “Medicaid coverage generated no significant improvements in measured physical health outcomes” versus being uninsured. But critics of Medicaid as well as the program’s enthusiasts should be careful in how they interpret the latest results, or its broader implications for Obamacare.

It’s an unmistakable fact that Medicaid has become a crummy insurance scheme. Benefits have been spread so thin, and in turn reimbursement rates to providers have been driven so low, that fewer providers are willing to see Medicaid patients.

Washington has given short shrift to this cruel problem. Medicaid is increasingly a hollow benefit. The White House has expanded the existing program while doing little to shore it up. This will exacerbate strains on access.

Medicaid patients are being relegated to third-rate clinics and long wait lines, if they can access care at all. It’s especially true when it comes to outpatient specialty care.

Obamacare follows a similar model. It promises a rich set of paper benefits, but relies on diminishing reimbursement rates to make the economics work. The narrow doctor networks found in Obamacare, and closed drug formularies, are the result of this construct. It’s a design feature of the underfunded promises that Obamacare makes, just like it has become a design feature of Medicaid. Health plans narrow provider networks to make the mandated benefits remotely affordable. In this way, Obamacare is going to inevitably fail the middle class in the same manner that Medicaid has failed the poor.

Indeed, the data on ER visits could reveal more than just the problems with Medicaid, but also some deeper truths when it comes to improving access to medical care. For one thing, insurance status alone doesn’t equate with access. Merely giving someone paper benefits doesn’t mean that they will be able to access the promised care.

This is especially true for the poor. When it comes to medical care, people can’t easily break from usual customs, even if a new insurance status affords them better opportunities. The poor are typically forced to frequent inner city clinics that are badly staffed and equipped. Insurance alone doesn’t change that.

To take one example, when older patients transition from Medicaid to Medicare, they will often continue to frequent the same crowded Medicaid clinics, even though their new Medicare benefit could afford them much better opportunities. If the poor are used to getting episodic care from places like the ER because they lack access to outpatient medical offices or after-hours providers who return phone calls, it could be that they will only increase these patterns when the have insurance. For many Medicaid patients, a hospital may be the only place where they can get access to specialty care since few outpatient specialists are willing to accept the insurance.

All of these things help explain the Oregon results, and Medicaid’s shortcomings.

In Washington, the policy focus is on expanding access to insurance, with short shrift given to the delivery side of the equation, and what insurance really affords. It’s a sure bet that the architects of these policy efforts care about the poor. But the prescriptions don’t work. That’s what the Oregon data is telling us.

How to fix these woes? It starts with a focus on the more systemic problems that impede access to quality medical care. Many of these problems stem from the inadequate reimbursement that leaves a paucity of providers willing to accept programs like Medicaid. There are also a shrinking number of providers willing or able to work in our inner cities.

But a more basic issue is the lack of access to properly staffed medical practices that can provide care continuity or providers who take after-hours calls and help patients avoid visits to the ER. Access to specialty care is a particular problem.

These problems are particularly acute when it comes to programs like Medicaid and now Obamacare, where budget constraints are a constant feature. Policy makers can’t increase budgets fast enough to keep up with their promises, or demand for services. So reimbursement rates get reduced as a form of rationing. Medical care invariably gets degraded, along with the expected outcomes.

If we’re really serious about improving the health opportunities for the poor, it’s going to take more than an insurance card and broad menu of paper benefits. It’s going to take a more concerted effort to make sure people are getting access to the care they most need, when they require it. That’s what will help reduce ER visits.

There are efforts that can address these challenges. The federal health clinics are one such opportunity. The Obama Administration rightly expanded this largely successful effort. A number of states like Indiana, Wisconsin, and Rhode Island have also tailored their Medicaid programs to improve the continuity of medical care.

These efforts require that politicians embrace other uncomfortable truths. We may be better off making sure we provide adequate access to the most basic and necessary care, rather than focus on comforting the political class with fictional insurance constructs that offer benefits in ink, but not in practice. Sometimes, Medicaid seems designed more to improve the policy comfort of its political champions, than the poor who are obligated to its inadequate provider networks.

Finally, healthcare is inherently a local endeavor. Good medical care requires local solutions tailored to the unique aspects of communities. Yet in Washington, the current fashion is to seize more central control over these undertakings.

The Oregon experiment will continue to bleed bad news. If the federal government wants to own the system, they need to take responsibility for the dismal results.

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