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ACA Fail Fractal
New Study Explodes ACA Rationale

A groundbreaking new study has just undermined a big rationale for Obamacare. Wonkblog reports on new research printed today in Science magazine that shows Medicaid users go to the emergency room more when they get added to the program:

The research…showed a 40 percent increase in emergency department visits among those low-income adults in Oregon who gained Medicaid coverage in 2008 through a state lottery. This runs counter to some health-care law supporters’ hope that Medicaid coverage would decrease this type of costly medical care, by making it easier for low income adults to see primary care providers.

“I would view it as part of a broader set of evidence that covering people with health insurance doesn’t save money,” says Jonathan Gruber, a health economist at the Massachusetts Institute of Technology, who has also studied Oregon’s Medicaid expansion but is not affiliated with this study. “That was sometimes a misleading motivator for the Affordable Care Act. The law isn’t designed to save money. It’s designed to improve health, and that’s going to cost money.”

Gruber’s quote is astounding, both for what it obscures as well as what it reveals. If cost-saving was a “misleading motivator,” it was one the administration eagerly peddled. Are we seeing the second great Obamacare deception here? Moreover, as Gruber should know, a earlier study last year on Oregon Medicaid found that Medicaid enrollees did not see measurably better health outcomes than those who remained uninsured. But Gruber is exactly right about the crucial takeaway here: whatever else it does, covering people with insurance doesn’t seem to save money.

This doesn’t, of course, mean we should scrap Medicaid, or stop aiming for universal coverage. But it shows just how serious the moral hazard associated with insurance can be. When people get insurance, they consume a lot more care, some necessary, some not. Sub-optimal use of the system doesn’t go away; rather, it increases. There’s not an easy way to solve this problem, but surely a big part of the solution needs to involve both better price signals in the system and a shift away from inefficient and costly service delivery practices. If we are very clear about the costs of the insurance model, and work hard at making easier and more economical to choose more efficient health care, we can start to mitigate the problem uncovered by this study.

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  • Andrew Allison

    I’m shocked, shocked to learn that a “groundbreaking” study and, sadly, The Feed, have discovered that a free good will be exploited.

    • Boritz

      Yeah, it’s that whole capitalistic maco, micro economics stuff or whatever.

  • rheddles

    There’s not an easy way to solve this problem

    Actually there is. You just don’t like it. It’s called the free market. People get to make their own economic decisions voluntarily based on all the information included in prices. That’s how we get life insurance. Or at least those of us who think it is important for us to provide for our families.

    • MarkE

      The problem with the free market solution is that poor people don’t make enough money to buy care when competing with everyone else. On the other hand if even part of the population, e.g., upper middle class on up, paid for their care in a market based solution we could at least get some useful pricing information for rational allocation for the other patients. Poor people could received HMO type care where consumption decisions are mostly made by experts. Progressives don’t like this because it doesn’t sound egalitarian.
      In fact some version of this system already exists in most European and South American countries where social paradises have already been created.

      • Jim__L

        There is an extensive network of charity hospitals across this country. If you think these hospitals are not well enough funded, take out your checkbook and donate more.

        The fact that Liberals do not put their own money where their mouths are when it comes to giving to charity is a major reason for the scorn that Conservatives have for Leftist policies and attitudes.

  • Kavanna

    Cost-saving was never one of the rationales for ObamaCare. Universal coverage was the ostensible public rationale. One of the plan’s main drawbacks was the failure to put the horse before the cart and deal with medical costs.

    Of course, this leaves off major but unspoken rationales, like providing a major bonanza for the already heavily-subsidized medical services sector (hospitals, nursing homes, etc.) and medical insurance companies.

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