The Effect of Health Insurance Coverage on the Use of Medical Services

A 10 percent decrease in the third party coverage rate is associated with a 4 percent decrease in emergency room visits.

In The Effect of Health Insurance Coverage on the Use of Medical Services (NBER Working Paper No. 15823), co-authors Michael Anderson, Carlos Dobkin, and Tal Gross exploit the abrupt change in third party coverage that occurs between ages 18 and 19 -- the result of young adults "aging out" of their parents' insurance plans -- to estimate the effect of health insurance coverage on the use of medical services. The authors find that "aging out" results in an abrupt 5 to 8 percentage point reduction in the probability of having health insurance, and that not having health insurance leads to a 40 percent reduction in emergency room visits and a 61 percent reduction in inpatient hospital admissions.

This study examines data on hospital emergency room use and inpatient visits from hospital censuses in Arizona, California, Iowa, New Jersey, New York, Texas, and Wisconsin between 1990 and 2007. These data are augmented by information from the National Health Interview Survey (NHIS) and the Medical Expenditure Panel Survey (MEPS).

The NHIS data suggest that the proportion of the total population that is uninsured increases by 4.6 percentage points at age 19, while the emergency room and hospital inpatient data imply that the proportion uninsured visiting those venues increases by 8.1 and 2.7 percentage points respectively at age 19.

Overall, the authors find that a 10 percentage point decrease in the insurance coverage rate is associated with a 4 percent decrease in emergency room visits. The net decrease in emergency room visits by 19-year olds suggests that newly uninsured patients do not substitute emergency room care for primary care in significant numbers.

Hospital admissions through the emergency room also drop by 1 to 2 percent at age 19. Direct inpatient admissions, which are more likely to be elective, fall by 6.7 percent for men and 6 percent for women (excluding pregnant women, almost all of whom are covered by either private insurance or Medicaid). The reductions occur at both non-profit and for-profit hospitals, but are particularly large at for-profit hospitals. There is no reduction in admissions to public hospitals. The authors estimate that if the United States adopted universal health insurance coverage and there were sufficient capacity, there would likely be an increase in hospital stays of roughly 3.8 million per year and in emergency room visits of approximately 13.1 million per year.

-- Linda Gorman