Fiscal Fitness:How States Cope

Medicaid/SCHIP cuts saves money up front but emergency departments take up the slack

Cuts in funding for Medicaid and SCHIP programs that reduce eligibility and enrollment are likely to achieve cost savings largely by reducing access and shifting costs away from the two programs, creating a larger pool of uninsured who are likely to turn to hospital emergency departments for care.

That's the analysis of Peter Cunningham, a senior health researcher at the Center for Studying Health System Change, writing in the January/February 2006 Health Affairs.

"Because the uninsured are already more dependent on emergency departments for their care compared with their insured peers, Medicaid cuts that raise the number of uninsured people could result in a surge of uncompensated care by EDs," Mr. Cunningham wrote. "The effects would be particularly high on public hospitals and other safety net hospitals that provide a disproportionately large amount of care to uninsured and low-income people."

Since many physicians already are reluctant to accept Medicaid patients because of low reimbursement, and further cuts could reduce the number of physicians who care for Medicaid patients, the result could be increased ED use, he said.

Although the availability of community health centers and other free clinics could mitigate the effects of reduced access to office-based physicians, reductions in Medicaid revenue, from which community health centers derive more than one-third of their income, could reduce community health center capacity in some areas and thus also lead to increased ED use.

Mr. Cunningham reports that compared with privately insured and uninsured people, Medicaid/SCHIP enrollees are much younger, poorer, more likely to be in single-parent families, and more likely to have health problems. "Differences in health status for adults are especially notable," he says.

About 40% of adults with Medicaid/SCHIP describe their health as fair or poor, compared with 25% for uninsured and 13% for privately insured people. Also, more than 25% of adult Medicaid/SCHIP enrollees report multiple chronic conditions, compared with 5.9% for uninsured and 9.5% for privately insured adults.

"The high rate of health problems among adult Medicaid/SCHIP enrollees likely reflects the fact that many qualify for Medicaid through disability and Medically Needy programs, while most children qualify based on income eligibility," Mr. Cunningham wrote.

Higher rates of health problems by Medicaid/SCHIP enrollees likely account for at least some of their higher levels of ED use compared with other low-income people, according to the study. More than one-third of Medicaid/SCHIP adult enrollees had an ED visit in the previous year, compared with about 20% of both uninsured and privately insured adults. Overall, ED visits per adult Medicaid/SCHIP enrollee are 2½ to three times those of privately insured and uninsured adults. Although adults in fair or poor health have higher levels of ED use across all coverage groups, ED use for Medicaid/SCHIP adults in fair and poor health is still about twice as high as for their privately insured and uninsured peers.

ED use for Medicaid/SCHIP and uninsured children is more similar and somewhat higher than it is for privately insured children, which Mr. Cunningham said may in part reflect the fact that Medicaid/SCHIP and uninsured children are more similar in their health status than they are to privately insured children. As with adults, ED use by low-income children in fair and poor health is much higher than for all children.

High ED use by Medicaid/SCHIP enrollees is consistent with their high use of health care in general, the survey found. Physician visits for adults with Medicaid/SCHIP are on average about twice as high as for privately insured adults and almost four times higher than for uninsured adults. Differences in physician use are generally smaller for children, although use by Medicaid/SCHIP enrollees still is higher compared with privately insured and uninsured children. Physician visits also are much higher for people in fair/poor health across all coverage and age groups, although Medicaid/SCHIP enrollees in fair or poor health have much higher use than other low-income people in fair or poor health.

ED use by Medicaid/SCHIP adults still is higher than for privately insured and uninsured adults, even after health status differences, other individual characteristics, and health system factors are extensively controlled for, according to Mr. Cunningham. Differences in health status and other factors account for more than half of the differences in ED use between Medicaid/SCHIP adults and uninsured and privately insured adults. "These results suggest a net decrease in ED use for adults who lose Medicaid coverage," Mr. Cunningham explains, although the decrease will be much smaller than implied by the actual differences in ED use.

Mr. Cunningham tells State Health Watch that a somewhat surprising finding is that both ED and physician use continues to be higher for Medicaid/SCHIP adults than privately insured adults, even after individual characteristics and health system factors are controlled for. Also, use differentials between privately insured and uninsured adults are much smaller than those between Medicaid/SCHIP and uninsured adults, perhaps reflecting the fact either that Medicaid/SCHIP enrollees have no copayments and deductibles for medical care use, or that the copayments are nominal compared with those for privately insured people.

"This is a very high-use population," he says. "Adults enroll for coverage because they have health problems."

Mr. Cunningham says a sizable reduction in Medicaid/SCHIP enrollment would have little impact on overall ED use among low-income people, although it likely would greatly increase the proportion of visits made by uninsured people. Thus, among low-income adults, a 25% decrease in Medicaid/SCHIP enrollment nationally would result in a decrease in ED visits by fewer than 600,000. However, while providers in general might see little change in ED volume, a higher share of those visits would come from uninsured patients. The percentage of all ED visits made by uninsured people would increase about five percentage points, from 24.4% of all ED visits to about 29%.

To the extent that enrollment reductions concentrate on people in fair or poor health, such as if changes were made to the state's Medically Needy program, he says, then the decrease in ED volume would be about one-third larger (900,000 visits). However, the increase in both the number and proportion of ED visits by uninsured people also would be larger, comprising about 30% of all visits by low-income people.

And the increase in the proportion of ED visits by the uninsured would be even greater if Medicaid/SCHIP enrollment reductions were focused on children, reflecting the fact that average ED use between Medicaid/SCHIP and uninsured children is more similar than for adults.

"The high use of EDs by Medicaid beneficiaries should be of concern to policy-makers," Mr. Cunningham says, "especially since about half of ED visits are for non-urgent medical problems. Redirecting much of this care into more appropriate primary care settings not only will save on program costs, but also could lead to improved access to and quality of care. Moreover, reducing nonurgent ED use and making care delivery more efficient are much more likely than enrollment reductions to achieve cost savings without shifting costs elsewhere."

Mr. Cunningham tells SHW that as state budget problems have eased, there has been a change in how state agencies view Medicaid/SCHIP, with several states moving to reverse earlier program cuts. For instance, he says, Illinois has undertaken a major effort to provide universal coverage to children, and Massachusetts has passed a coverage mandate. And there are other examples of states retreating from looking at any possible cost-cutting measures.

"State officials seem more mindful of the impact of the loss of coverage on individuals and on the health care system," he says, "and they realize that cuts also affect providers."

American College of Emergency Physicians board member David Seaberg, MD, associate chairman of the emergency medicine department at the University of Florida in Gainesville, tells State Health Watch hospital emergency departments already are struggling to meet the increased burden on safety net hospitals without any further increases in the number of uninsured coming to the facilities.

"Medicaid and SCHIP protect vulnerable populations with medical illnesses," he says. "They should be getting into more standardized care. But if they lose their coverage, they have nowhere else to go. This population should be protected. It's hard because providers don't want to see more Medicaid patients. The emergency departments provide good episodic care, but the answer lies in directing these patients to more appropriate primary care. Taking them out of the insurance pool makes no sense."

Contact Dr. Cunningham at (202) 484-4242 or e-mail, and Dr. Seaberg at (352) 265-5911 or by e-mail Download the study report abstract at The full text is available for Health Affairs subscribers or through pay-per-article.