It’s one of those scenarios that reminds me of the old saying, “the road to hell is paved with good intentions”. A recent study, published in Health Care Management Review, looked at some of the unintended consequences of the Affordable Care Act on hospital productivity. The study authors compared hospital productivity in Massachusetts to hospitals nationwide by merging data from AHA’s Annual Survey for fiscal years 2005 through 2008 and The Center for Medicare and Medicaid Services Medicare Data Set.
There is an assumption in the healthcare debate that the “individual mandate” laid out in the Affordable Care Act will lead to lower hospital costs. One reason for this belief is that the uninsured/underinsured will take advantage of preventative services and primary care rather than wait until their symptoms are severe enough to require hospitalization. This study challenges that notion, at least in the short term.
Hospital Productivity Drops with Individual Mandate
Massachusetts serves as a good model for the effects of the individual mandate on hospitals. They implemented universal healthcare in 2007. In the study, 51 Massachusetts hospitals, 197 matched hospitals used as a control group, and 2,916 other hospital’s productivity trends were compared between 2005 and 2008. From 2005 to 2006, all hospitals in the study saw a slight decrease in productivity however, from 2006 to 2007, Massachusetts hospitals saw the largest decrease of 2.4%. The control group was close at 1.6% and the other U.S. hospitals only saw a 0.3% decrease. By 2008, Massachusetts hospitals had lost a total of 3.5% productivity since 2005. The control group showed a 1.6% loss in the same time period however, the other U.S. hospitals showed a 4.1% gain in productivity.
Unintended Consequences Reflect “Pent Up Demand”
Study author Mark A. Thompson, PhD, of Texas Tech University said, “Based on the Massachusetts experience…legislating mandatory health insurance coverage at the national level is likely to be accompanied by a near-term decrease in overall hospital productivity and a concomitant increase in overall health care costs.” The study said that there is likely a “pent up demand” among the uninsured and underinsured that is reflected in these economic numbers. Discretionary services that they may have forgone in the past are now being used. Hospitals may not have the resources necessary to meet the demand and typically reimbursement for such services is not very profitable for the hospital.
Based on these findings, the study had two recommendations for healthcare policy makers:
First, the use of states as test beds for major policy changes has a significant potential to inform the national debate. Having several more years of data on Massachusetts’ experience with health insurance mandates will yield far more accurate cost and productivity models for comparable national initiatives.
The second lesson is that taking a staged approach to policy development may be more efficacious from both the political (Kingsdale, 2009) and the fiscal perspectives. Politically, it allows the public to weigh in on their support for a program having experienced it first-hand. From a fiscal perspective, understanding the unintended consequences of initial reforms allows for better designed policies in later stages.
I think a good lesson to learn from this study is that when policy makers introduce sweeping reforms like the Affordable Care Act, they need to understand that there are often unintended consequences that could do real economic damage. This seems especially important now as the U.S. economy is teetering on the edge of another recession. The study does acknowledge that in the long-term, hospital costs could go down if, and that is a big if, they can shift nonemergent care away from their emergency departments. If universal coverage could reverse this trend then hospitals may see significant increase in productivity.