Question

Based on economic theory, would utilization of hospital emergency room care increase or decrease when a previously uninsured population receives health insurance coverage? Explain and provide reasons for both sides of why utilization would increase AND decrease.

Answer 1

Answer : Utilization of hospital emergency room care increase or decrease when a previously uninsured population receives health insurance coverage.

Increase : Determinants of demand has one key factor which is population, when population increases demand increases. In this case, covered population is increasing.

Consumers will go to doctors often as they may not have to pay none or less and hence precautionary beliefs will increase visits and with more diagnosis of more people the emergency room demand will go up.

There is no substitute for treatment and hence demand will go up.

Decrease: The diagnosis will now happen at early stages for many diseases and with initial treatment it will get cured without hospitalisation at later stage.

When people are insured then they have choices of hospitals and may visit anywhere and hence demands will be spread across places.

More coverage may make hospitals sure of income and hence new hospitals will come up and with increased supply and reduced demand, overall demand for hospitalisation will decrease.

Hospitals will also come up with better techniques of diagnosis as economies of scale will reduce costs initially.