Do Large Copayments Reduce Emergency Department Visits for Low-severity Conditions Among Publicly Insured Children?

For decades, health care spending has grown at rates far in excess of that of the US economy, raising concerns about the long-term sustainability of the nation’s health care system. Policy makers are particularly concerned about the value of this spending, with research suggesting that over 30% of US health care spending is “wasteful”. Recent efforts to address waste have focused on the misaligned provider (supply) and patient (demand) incentives that contribute to the utilization of low value health care. Efforts to control health care spending through demand side incentives can be traced to the pioneering RAND health insurance experiment (HIE) of the 1970s. The evidence from the RAND HIE has been instrumental to policies which have encouraged the growth of high deductible health plans which now account for 30% of employer sponsored health insurance coverage.

One area of wasteful spending that has been increasingly targeted through cost-sharing is emergency department (ED) visits. Research suggests that over half of all ED visits in the United States are ‘unnecessary’, leading to billions of dollars in wasteful spending annually. Motivated by budgetary pressures, state Medicaid programs have attempted to reduce these unnecessary visits among adult enrollees through increased copayments for non-emergent visits. Existing studies have found mixed evidence of the effectiveness of these copayments in reducing ED visits for low severity conditions.

Although children are exempted from all forms of cost-sharing in Medicaid, states have greater discretion to use cost-sharing within the Children’s Health Insurance Program (CHIP). In an earlier paper using data from Alabama’s CHIP program, known as ALL Kids, we found that a modest increase in ED copayments led to only a small reduction in overall visits and had no statistically significant effect on low-severity ED visits.

This study updates our previous work to examine the impact of a second, and much larger, increase in ALL Kids ED copayments that occurred in 2012. In contrast to the earlier uniform increase of $5, the ED copayment jumped from $15 to $60 for enrollees with incomes above 150% FPL, but was unchanged ($5) for enrollees with family incomes below 150% FPL. We estimate the impact of the copayment increase on ED visits using a difference-in-differences approach.

Using ALL Kids claims data from 2008 to 2016, we construct a person-month dataset containing counts of ED visits of varying levels of severity. Using a modified version of the NYU ED algorithm, we assign ED visits to one of three categories of severity (high, intermediate and low) based on the estimated probability that ED care was needed. We estimate the impact of the copayment increase on ED utilization both in total and by severity category, using linear probability models that control for beneficiary characteristics (age, race, gender, location of residence and chronic disease status) and linear/quadratic time trends.

This research will provide useful information to other state CHIP programs regarding the effectiveness of more aggressive patient cost-sharing in deterring ED visits for low severity conditions.