Health Law Spared Young Adults From High Hospital Bills

May 29, 2013
Originally published on May 29, 2013 4:18 pm

Researchers at the RAND Corporation set out to find some hard data on one aspect of the health law: Does having medical insurance protect young adults from the financial ruin that often comes with a major injury or illness?

The quick answer: Yep.

Since September 2010, the Affordable Care Act allowed young adults to remain on their parents' medical insurance until they turn 26, and 3.1 million young people have taken advantage of the new rule.

The RAND researchers looked at nearly a half a million visits young adults made to emergency rooms in hospitals around the country before and after the under-26 provision took effect.

"We looked at just the most serious conditions," said Andrew Mulcahy, an associate policy researcher at the RAND Corporation. Mulcahy and his colleagues pored over actual hospital records for bone fractures, poison, traumatic brain injuries, and other unfortunate events that would require an urgent trip to the hospital.

In a study published Wednesday in the New England Journal of Medicine, the RAND analysis found that the new law resulted in $147 million in hospital bills charged to private insurance companies in 2011.

"Some of those costs would have been born by individuals," said Mulcahy. "Some of those costs would have been ultimately been born by hospitals as uncompensated care."

Indeed, as might be expected when any uninsured people gain coverage, the young adults insured under their parents' plans were shielded from the potentially catastrophic cost of a medical emergency.

"That's exactly what the law intended," said Marian Mulkey, director of Health Reform and Public Programs Initiative at the nonpartisan California HealthCare Foundation.

But the millions of newly insured adults didn't come free of charge, added Mulkey. "The cost of covering those people was spread over all the people with similar coverage who paid a little bit more in their premiums," she said.

Those added premium costs were likely to be fairly low since young adults consume much less health care and can help to balance out the higher medical bills of their parents and other older workers.

For hospitals, though, more insured customers is unequivocally good news, especially when those new customers have private insurance, which pays more than Medicare and Medicaid.

One goal of the health law is to reduce the number of unpaid hospital bills, said Joseph Antos, a health care researcher at the American Enterprise Institute. To the extent that people sign up for insurance when the online marketplaces open in the fall — and more young adults continue to sign up on their parents' plans — that just might work. "Then I think we'll be successful in reducing uncompensated care," he said. "In other words, more of those services will be paid fully, and more of those services will be paid at a higher rate than they were before.

Still, Antos cautioned that in order for hospitals to remain financially viable, public insurers like Medicare and Medicaid will need to resist slashing payment rates.

Copyright 2013 Kaiser Health News. To see more, visit http://www.kaiserhealthnews.org/.

Transcript

MELISSA BLOCK, HOST:

It's been more than two years since the Affordable Care Act began to take effect. The biggest changes won't kick in until January 1st, when coverage will be extended to tens of millions of people. But a new study, out today from the RAND Corp., shows the law is already having a significant positive impact on one group of Americans - young adults. Sarah Varney reports.

SARAH VARNEY, BYLINE: Beginning in September 2010, the Affordable Care Act allowed young adults to remain on their parents' medical insurance until they turn 26. Since then, some 3.1 million of them have gained health coverage.

It may sound obvious, but researchers at the RAND Corp. wanted to collect hard data on whether that coverage actually protected young adults from the financial ruin that often comes from a major accident or illness when someone is uninsured. So they looked at nearly a half a million visits young adults made to emergency departments - or E.D.s - around the country before and after the so-called dependent provision took effect.

ANDREW MULCAHY: We looked at just the most serious conditions. We call them nondiscretionary because if you have one of these fractures or other serious illnesses, you will go to the E.D.

VARNEY: Andrew Mulcahy is a RAND researcher who co-authored the paper, which is published in this week's New England Journal of Medicine. Mulcahy and his colleagues poured over actual hospital records for bone fractures, poison, traumatic brain injuries and other unfortunate events. They found the new law resulted in $147 million in hospital bills being shifted to private insurance companies, in 2011 alone.

MULCAHY: Some of those costs would have been borne by individuals, and some of those costs would ultimately have been borne by hospitals as uncompensated care.

VARNEY: Indeed, those insured under their parents' plans were shielded from the potentially catastrophic cost of a medical emergency, says Marian Mulkey, a health policy researcher at the nonpartisan California HealthCare Foundation. That's exactly what the law intended, she says. But that added coverage wasn't free.

MARIAN MULKEY: The cost of covering those people was spread over all the people with similar coverage, who paid a little bit more in their premiums.

VARNEY: Those added premium costs were likely to be fairly low since young adults consume much less health care, and can help to balance out the higher medical bills of their parents and other older workers. For hospitals, though, more insured customers is good news, especially if those new customers have private insurance - which pays more than Medicare and Medicaid.

Joseph Antos is a health care policy expert at the conservative American Enterprise Institute. Antos says one of the goals of the health law was to reduce the number of unpaid hospital bills. He says to the extent that people sign up for insurance when the online marketplaces open in the fall - and more young adults continue to sign up on their parents' plans - that just might work.

JOSEPH ANTOS: Then I think we'll be successful in reducing uncompensated care. In other words, more of those services will be paid fully, and more of those services will be paid at a higher rate than they were paid before.

VARNEY: Still, Antos cautions that in order for hospitals to remain financially viable, public insurers - like Medicare and Medicaid - will need to resist slashing reimbursement rates.

For NPR News, I'm Sarah Varney.

(SOUNDBITE OF MUSIC)

BLOCK: This story came to us from Kaiser Health News, a nonprofit news service. Transcript provided by NPR, Copyright NPR.