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Healthcare Costs Drop When Poor are Insured

A new study coming from the University of California-Irvine may upset Republicans who argue health care reform is too costly: Researchers found health care costs on the whole fall when poorer, uninsured patients are provided health insurance.

“In a case study involving low-income people enrolled in a community-based health insurance program, we found that use of primary care increased but use of emergency services fell, and–over time–total health care costs declined,” says David Neumark, an economics professor and co-author of the study.

The study focused on uninsured people living in Richmond, Va., who fell 200 percent below poverty level. Health care costs fell by almost 50 percent per participant, from $8,899 in the first year to $4,569 in the third after they received insurance. They found there were more primary care visits, but less emergency room visits. Costs per visit for both inpatients and outpatients also decreased, as did the length of inpatient stays. Overall costs per enrollee per year for all participants with at least one year of enrollment declined from $7,604 to $4,726.

The demographics of these participants paralleled those of the population that will be affected by changes under the Patient Protection and Affordable Care Act, Neumark says.

“A lot of the debate about health care reform surrounds the issue of whether we’re setting up something that’s going to cost us more by increasing use of medical services or something that will cut costs through more appropriate and timely use of medical services,” Neumark says. “Our research shows that, over time, costs can be reduced through increased use of primary care and reductions in emergency-department visits and hospital admissions, but it may take several years of coverage for substantive savings to occur.”

By Kathryn Mayer