Fragmentary "Competitive" Private Health Insurance Lowers Quality of Care

In a paper published in January, 2011 entitled Is Fragmented Financing Bad For Your Health?, authors Steven D. Pizer and John A. Gardner ask the question: What is the impact of our fragmentary private health insurance system on health outcomes?

Their outcome-based research examines

hospitalization for ambulatory care sensitive conditions (ACSC hospitalization), which is a widely used and accepted measure that can be constructed easily from administrative data.

ACSC conditions are defined as

those "for which good outpatient care can potentially prevent the need for hospitalization, or for which early intervention can prevent complications or more severe disease"

Examples of ACSC conditions are diabetes (Types I & II), hypertension, COPD, pediatric gastroenteritis,  bacterial pneumonia, UTI, angina, congestive heart failure, and perforated appendix (leading to acute appendicitis).

It is understood in the health community that hospitalizations for these manageable conditions are considered defects in the healthcare system.  And costly defects at that.  Anything that interferes with the treatment of these preventable conditions ends up hurting patients and costing them money.  And that's what fragmentary health insurance does.

Their dataset is made up of veterans who participate in a mix of insurance schemes including the all-inclusive VA system as well as private insurance systems.  Their conclusions are revealing and are applicable to the general population (with some caveats).

[D]oes fragmented financing meaningfully disrupt continuity of care? Our results suggest that fragmented financing increases the risk of coordination failures that result in ACSC hospitalization, so the effect on quality of care is important for individual patients. Beyond this, there is a financial impact as well because potentially avoidable hospitalizations are costly. We can begin to get an idea of the financial cost with some fairly simple calculations. In 1999 and 2000, the average Medicare payment for an ACSC hospitalization in our sample was $5,249. If the average degree of fragmentation in our sample was reduced by one standard deviation, the average six-month probability of ACSC hospitalization would have declined from 4.3% to 3.2%, which translates into $96 per person per year ($48 per six-month period). This is equivalent to a 3% reduction in total Medicare hospital spending per beneficiary in 2000, a financially significant effect, suggesting that fragmented financing has substantial costs that have not previously been considered.

America, wake up and smell the Single Payer before it's too late!