Uninsured ? Fewer services , less readmission , more death . A study of Maryland ’ s hospitals

Uninsured individuals receive fewer health care services for at least three reasons: higher prices, responsibility for the entire bill, and potential provider reductions for concern of nonpayment. This study isolates differences in service levels between insured and uninsured individuals that are attributed to different effective prices; the uninsured pay the bill without a contribution from an insurance company. I capitalize on Maryland’s highly regulated health care system, where prices are set by the state, are uniform across all patients, and hospitals are compensated for free care and bad debt, to isolate the difference in quantity demanded by the uninsured. While the Oregon study compares Medicaid individuals and their low-income uninsured counterparts, this paper considers income variation among the uninsured, quantifies the difference in demand in an environment with uniform prices, and evaluates health outcomes in light of these reductions. A Blinder-Oaxaca decomposition estimates uninsured individuals receive 8.4% fewer services after accounting for differences in characteristics. Compared to insured patients, the uninsured are 74% as likely to be readmitted. This difference in service level and readmission rates is larger for patients residing in low-income zip codes and smaller in wealthy zip codes. This suggests that income is a substantial constraint for uninsured patients, and as this constraint relaxes, more services are demanded. For illnesses with a high risk of mortality, both services demanded and readmission rates are not statistically different for insured and uninsured individuals. Mortality rates are similar for insured and uninsured individuals living in the bottom 75% of average income by zip code. Differences in the top 25% seem to be attributable to small numbers of uninsured individuals. While this paper analyses Maryland, it provides insight into demand for insured individuals with high-deductible plans country wide. Prior to meeting their deductible, these insured patients face similar conditions to uninsured patients in Maryland — they have access to negotiated rates but are solely paying the bill.