Hospitals as Insurers of Last Resort (WP-15-07)


WP-15-07

Craig Garthwaite, Tal Gross, and Matthew Notowidigdo

American hospitals are required to provide emergency medical care to the uninsured. The researchers use previously confidential hospital financial data to study the resulting uncompensated care, medical care for which no payment is received. They use both panel data methods and case studies from statewide Medicaid disenrollments and find that the uncompensated care costs of hospitals increase in response to the size of the uninsured population. The results suggest that each additional uninsured person costs local hospitals $900 each year in uncompensated care. Similarly, the closure of a nearby hospital increases the uncompensated care costs of remaining hospitals. Increases in the uninsured population also lower hospital profit margins, which suggests that hospitals cannot simply pass along all increased costs onto privately insured patients. For-profit hospitals are less affected by these factors, suggesting that nonprofit hospitals serve a unique role as part of the social insurance system.

Craig Garthwaite, Assistant Professor of Strategy, Kellogg School of Management, Northwestern University

Tal Gross, Director, Assistant Professor of Health Policy and Management, Mailman School of Public Health, Columbia University

Matthew Notowidigdo, Associate Professor of Economics and Faculty Fellow, Institute for Policy Research, Northwestern University

 

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