Public Insurance and Child Hospitalizations: Access and Efficiency Effects

The 1983-1996 period saw enormous expansions in access to public health insurance for low-income children. We explore the impact of these expansions on child hospitalizations. While greater access to inpatient care may increase hospital utilization, improved efficiency of care for children who are also newly-eligible for primary care could lower hospitalization rates. We use a large sample of child discharges from the National Hospital Discharge Survey to assess the net impact of Medicaid expansions on hospitalizations during this period. We find that total hospitalizations increased significantly, with each 10 percentage-point rise in eligibility leading to an 8.4 percent increase in hospitalizations. Thus, the access effect strongly outweighs any efficiency effect produced by expanded coverage. However, we find some support for an efficiency effect: the increase in hospitalizations for unavoidable conditions is much larger than that for avoidable conditions that are most sensitive to outpatient care. Indeed, the increase in avoidable hospitalizations is less than half that of unavoidable hospitalizations, and it is not significant. We also find that expanded Medicaid eligibility reduced the average length of stay, but increased the utilization of inpatient procedures, so that the net impact on total costs per stay is ambiguous.