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How Would Health-Care Reform Affect Patient Health?

CAMBRIDGE – Health-care reform is the major policy issue commanding attention in the United States. A crucial feature of the debate is the official estimate of the number of individuals who would lose their health insurance under the various plans that have been proposed to repeal and replace the existing Affordable Care Act (better known as “Obamacare”).

The prospect that repealing Obamacare would cause more than 20 million people to lose their formal insurance coverage, as the Congressional Budget Office has estimated, is understandably a serious barrier to legislative progress. It is important, therefore, to understand just what that would mean in practice, and how much it would actually affect the health of those who lose their formal insurance.

The primary reason for the loss of insurance in the proposals to repeal and replace Obamacare is the projected decline in Medicaid coverage. Medicaid is the joint federal-state health-care program in which the federal government defines who is eligible, stipulates which benefits must be provided, and finances those benefits based on a formula whereby states with low average incomes receive a larger share of federal funding.

People who qualify for Medicaid do receive substantially more care than those without formal insurance – more doctor visits, prescriptions, hospital admissions, etc. They also have substantially lower out-of-pocket medical costs than the uninsured, including the elimination of “catastrophic” out-of-pocket costs. As a result, they are also much less likely to skip paying other bills because of medical debts or to have nonmedical bills sent to collection.

If reform legislation reduces Medicaid benefits, the individuals who lose benefits would continue to receive free care in outpatient departments, emergency rooms, and as hospital in-patients. In general, this is paid for by the states through their “free care” programs. And individuals who are billed for services understand that providers generally do not attempt to collect from low-income patients. Moreover, those who are no longer in the Medicaid program do not lose care from the many doctors who now refuse to serve Medicaid patients because of the low fees allowed in the program.

The most important fact to bear in mind is that enrollees in Medicaid show no significant improvement in clinical physical health outcomes. This was the main finding of a large “natural experiment” supported by the federal government.

The experiment occurred when the state of Oregon opened enrollment to Medicaid in 2008, after the opportunity had been closed for many years. Because the state did not have enough funds to accept all 90,000 individuals who wanted to enroll, it conducted a lottery to select about 30,000 individuals who were given the opportunity to apply for Medicaid.

A federally financed research team of physicians and health-care economists examined hospital records and other clinical information and also spoke with the enrollees and with those not admitted. The researchers concluded that self-reported overall health and depression improved among those who enrolled in Medicaid, and that there was an increase in the diagnosis and treatment of diabetes for this group. But there was no significant improvement in clinical physical outcomes for conditions including hypertension, high cholesterol, or diabetes.

Although the evidence indicates that the proposed cutbacks in federal dollars for Medicaid would not harm the physical health of those who lost their coverage, the reduction would force states to increase spending on their free-care programs. The cuts would also increase the costs to hospitals that provide care that is not reimbursed.

It is not surprising that the prospect of adding these costs for tens of millions of patients to states’ budgets and to hospital costs causes state governors and hospital administrators to protest when Congress proposes cutting back on the Medicaid program. But it is important for the public and members of Congress to understand the real reason for their opposition.