NCPA - National Center for Policy Analysis

Does Health Insurance and Seeing the Doctor Keep You Out of the Hospital?

September 21, 2011

An important issue in assessing the recent health care reform is the likely cost of expanding health insurance to previously uninsured persons.  Proponents of expanding health insurance often argue that in addition to improving health, expanded insurance may reduce the costs of health care because previously uninsured persons will use more primary care services that will reduce use of more expensive emergency room services and hospitalizations for conditions preventable by primary care.  In this article, Robert Kaestner of the University of Illinois and Anthony Lo Sasso of the University of Illinois at Chicago assess whether health insurance coverage and the use of physician services is associated with more or less hospitalization.

To study this issue, Kaestner and Lo Sasso presented three different analyses: two that used nationally representative samples of adults from the National Health Interview Survey (NHIS), and one that used proprietary data on employees enrolled in private, employer-sponsored health insurance plans.

  • Results from analyses that used the NHIS provided consistent evidence that health insurance was associated with greater hospitalization.
  • Uninsured persons were between 33 percent and 72 percent less likely to report a hospital admission than insured persons.

Using proprietary data from an insurer, Kaestner and Lo Sasso were better able to investigate whether greater use of physician services was associated with more or less hospitalizations.

  • Estimates from this analysis indicated that greater outpatient spending, primarily non-pharmacy spending, was associated with more hospital admissions.
  • For example, a $500 increase in outpatient spending was associated with an 11.5 percent increase in inpatient spending among employees in the employer-sponsored insurance plans in the sample.

Overall, the findings suggest gaining health insurance and using more primary care services leads to more hospitalizations as a result of physicians' discretionary decisions regarding aggressive and intensive treatment.  In addition, health insurance has a direct effect on hospitalization because it lowers the price of inpatient care.  The implication of these findings is that expanding health insurance, as the recent Patient Protection and Affordable Care Act proposes, will be cost increasing.

Source: Robert Kaestner and Anthony Lo Sasso, "Does Health Insurance and Seeing the Doctor Keep You Out of the Hospital?" American Enterprise Institute, September 13, 2011.

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