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Does More Primary Care Increase Healthcare Costs Instead of Lowering Them?

Health care reformers often argue that increasing patients’ access to doctors (especially primary care doctors) can actually lower health care costs in the long run, as these doctors can help diagnose and manage conditions before they lead to more expensive treatments and hospitalizations.  But a new paper by economists Robert Kaestner and Anthony T. Lo Sasso disputes that theory. Here’s the abstract:

By exploiting a unique health insurance benefit design, we provide novel evidence on the causal association between outpatient and inpatient care. Our results indicate that greater outpatient spending was associated with more hospital admissions: a $100 increase in outpatient spending was associated with a 2.7% increase in the probability of having an inpatient event and a 4.6% increase in inpatient spending among enrollees in our sample. Moreover, we present evidence that the increase in hospital admissions associated with greater outpatient spending was for conditions in which it is plausible to argue that the physician and patient could exercise discretion.

The authors further conclude that “the implication of these findings is that expanding health insurance, as recent federal reform (Patient Protection and Affordable Care Act) proposes, will be cost increasing.”