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Hospitals as Insurers of Last Resort

Author

Listed:
  • Craig Garthwaite
  • Tal Gross
  • Matthew J. Notowidigdo
Abstract
American hospitals are required to provide emergency medical care to the uninsured. We use previously confidential hospital financial data to study the resulting uncompensated care, medical care for which no payment is received. We use both panel-data methods and case studies from state-wide 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 non-profit hospitals serve a unique role as part of the social insurance system.

Suggested Citation

  • Craig Garthwaite & Tal Gross & Matthew J. Notowidigdo, 2015. "Hospitals as Insurers of Last Resort," NBER Working Papers 21290, National Bureau of Economic Research, Inc.
    • Handle: RePEc:nbr:nberwo:21290
    Note: EH PE
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    References listed on IDEAS

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    More about this item

    JEL classification:

    • H51 - Public Economics - - National Government Expenditures and Related Policies - - - Government Expenditures and Health
    • I11 - Health, Education, and Welfare - - Health - - - Analysis of Health Care Markets

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