Impact of Health Savings Account-type Plans on Healthcare Utilization Among Low-income Adults? Evidence from a Hospital in Indiana

Studies have shown that consumer-directed health plans and health savings accounts reduce healthcare spending and utilization of healthcare services among employer-offered private insurance. Existing studies look at the adverse selection into such plans and estimate the utilization of such plans offered to their employees by the firm(s). There is little to no research on healthcare utilization, specifically among low-income population, who are enrolled in plans that are offered through government-sponsored health insurance, and require enrollees to contribute to a health savings-type account.

State of Indiana in January 2015 expanded its Medicaid program for childless adults with income ≤138% of federal poverty level through Healthy Indiana Plan (HIP 2.0). Before this expansion, since 2008 as a pilot HIP program (HIP 1.0), Indiana had offered a capped enrollment for childless adults. The enrollees are required to contribute to a health savings-type account (called POWER account) with monthly contributions ranging from $1 to $20 based on income; unused contributions would roll over to the next year. The State pays the first $2,500 annual deductible to this account and enrollees could choose the plan from one of the four insurers that the state has contracted to manage. There is a co-payment for visiting emergency room (ER) with a non-emergent condition.

In this study, we exploit the expansion of HIP 2.0 in 2015 to estimate the short-term impact of patients switching to HIP 2.0 on hospitalizations. We use the discharge data from a 300-bed hospital in Central Indiana from 2013 to 2016 for the analysis. We use difference-in-difference approach, with patients enrolled in the HIP 1.0 (in 2013/2014) as a control group and controlling for patient characteristics such as gender, race, age, comorbidities, and patient location. The key identification assumption is that the treated and control group would have the same trends in the absence of the Healthy Indiana Plan. Any concern on identifying assumption being violated can be mitigated by the income eligibility requirements of Healthy Indiana Plan, which is the same for both the treated and control group during pre- or post- HIP expansion, and also due to the inclusion of patient-level demographic and health indicators as controls in all the models.

Using OLS and Poisson regression difference-in-difference specifications, we find that hospitals experienced a reduction in overall patient visits by 28.3% when patients switched from a non-HIP insurance (in 2013/2014) to HIP 2.0 (in 2015/2016) relative to the control group. These effects were statistically significant for ER and outpatient visits at the hospital. Also, we find evidence of a reduction in annual charges associated with ER visits, but such effects were statistically insignificant for both inpatient and outpatient visits. The results also hold while restricting the distance from hospital to the patient’s location within the sample median distance of 3.6 miles.

This study provides preliminary short-run evidence of the impact of low-income enrollees, who are required to contribute to a health savings-type account plans, on reducing ER and outpatient visits and also suggestive evidence on reduction in total charges at ER.