The problem with emergency rooms

Inadequate emergency rooms are one of the most neglected policy issues in the United States.  Read this depressing article.  Excerpt:

Emergency medical care in the United States is on the verge of
collapse, with the nation’s declining number of emergency rooms
dangerously overcrowded and often unable to provide the expertise
needed to treat seriously ill people in a safe and efficient manner.

Long waits for treatment are epidemic, the reports said, with
ambulances sometimes idling for hours to unload patients. Once in the
ER, patients sometimes wait up to two days to be admitted to a hospital
bed.

As a system, U.S. emergency care lacks stability and the
capacity to respond to large disasters or epidemics, according to the
25 experts who conducted the study. It provides care of variable and
often unknown quality and depends on the willingness of doctors and
hospitals to lose large amounts of money.

That’s
the grim conclusion of three reports released yesterday by the
Institute of Medicine, the product of an extensive two-year look at
emergency care.

This is one reason why we are less well suited to defend against a pandemic or a major terrorist attack than many people think.  Note that emergency rooms are unpriced resources for many users, so this outcome should not surprise the economist.  Did you know that the number of emergency rooms has decreased since 2001?

Are any of you willing to return to pre-1986 policy, when emergency rooms were not obliged to treat all comers?  Is there evidence on how big a difference this law made?  If we expanded emergency room capacity, but kept current law, would we in effect have national health insurance, paid for by an (implicit) tax on other forms of medical care?

Here is an article on how emergency rooms work.  Here is a claim that most people don’t need to go.  A cross-country comparison of the economics of emergency rooms would make for a fine dissertation, and then some.

Comments

This post about overloaded emergency rooms and the declining supply of emergency rooms is a classic example of what is wrong with public debate in the USA. The elephant is standing in the room, trumpeting loudly, and making an awful mess of the place. Yet, almost everyone pretends they can’t see the elephant and in fact, the elephant doesn’t exist. The elephant is, of course, immigration, particularly illegal immigration.

Type ‘“emergency room† “illegal alien† closure’ into Google and you see what I mean. Remove “illegal alien† from the search and the first hit is an article making the same point I am. The unwillingness of politically correct discourse to admit the obvious. Unskilled immigration has significant negative externalities and little positive value. We “know† that unskilled immigration is only marginally valuable because Cowen/Tabarrok insist that the labor demand curve is essentially flat.

However, this is just one example of the larger problem. A long list of topics are publicly debated in this country without using the “I† word. Yet the “I† word is at or near the core of many of these topics. A few examples would include declining public education (why exactly are California’s schools so bad), declining wages (just in case the labor demand curve isn’t flat), unaffordable housing (cheap labor should make California’s housing affordable†¦), gridlock (not in California of course), crime, the growing uninsured population, Medicaid burdens, taxes, air & water shortages, foreign oil dependence, etc.

All of these issues are more or less immigration problems. Some more (education, wages, housing), some less (oil dependence). However, none can be reasonably understood without careful consideration of the immigration component. Yet, the “I† word is no where to be seen.

Interesting post. If you blogged on immigration and emergency rooms a few weeks ago, I missed it, so I'm glad you blogged about the topic again. Tragedy of the commons it sounds like.

What about using a voucher system for emergency care. Every citizen in the United States could be allocated a coupon for emergency care. Coupons could each buy you $x worth of emergency care. Families of 4 would receive coupons, etc. Make the vouchers transferable so that markets could move the vouchers to those who need them the most. And you could even make it so that citizenship is only a precondition for receiving the initial allocation, but make non-citizens able to buy (and sell) them on the market.

... allocated a coupon ...

This is your brain on illegal immigration. How about using credit cards for emergency care? No silly gov't allocation required.

...and how would you calculate the 'supply' of "emergency-care" (current & future) when issuing your $x vouchers ?

Do you mean how much money would the government be willing to subsidize free emergency care? Insofar as its a policy goal, the government would need to estimate the demand for low income emergency care, and create vouchers corresponding to that aggregate number. Issuing as the vouchers are enforceable, excludable and transferable, then sellers will sell emergency care to redeem the coupons.

How would you calculate/control/guarantee the 'quality' of that 'supply' ?

If emergency care is a competitive market, and if people prefer quality care, then it should be provided up to the point where the marginal costs of providing it are equal to the marginal revenue gained from a coupon, just like any market, right?

What penalties would you impose against the suppliers & users of your voucher-system ... if they misused or did not comply with that system's rules ?

I'm not sure what rule-breaking you're talking about. Fraud and counterfeiting of vouchers?

How would you calculate your administrative/legal 'cost' of ensuring a satisfactory 'supply' system, and policing the overall system ?

Unless I'm missing something in your objections, issuing vouchers that can be redeemed, and assuming the market is competitive, will cause the sellers with least cost to provide emergency care. Markets lead low-cost providers into the market and escort the high-cost providers out, so shouldn't the market outcome be the one with lowest cost? Households will be selecting their provider, too, keep in mind, not administrators.

Where would you get the money for your system ?

Well, before I answer this, note that it sounds like from what Tyler said that the US government already has made it a policy objective to provide emergency care to low income families. To do this, they're going to have to do more than simply put price caps on what emergency hospitals can charge, though. If they put price caps at zero, not only does this create a moral hazard problem for people who may overuse emergency care, take unnecessary risks, or sub-optimally invest in insurance, but it may lead to sellers leaving the market altogether, which is what it sounds like Tyler is describing to me. So, if the stated goal is to provide emergency care to poor families, and assuming efficient allocation of emergency care is our goal, then pricing the care is an important starting point. Vouchers have been used successfully in other markets, such as tradable pollution permits, and have the advantage of letting the low-cost providers remain.

So, to answer your question, the money has to come from the state. How they fund that is another matter altogether, but if the state has already made it their goal to provide emergency care to poor families, then markets may get them there without suffering the negative effects from price controls. That's my point.

What is the probability that your system would work as you envison it ?

Markets work pretty well all the time. Since emergency care is a scarce resource, it sounds like markets might help allocate them without causing the supply side to disappear. Transferring money to households is going to have the least cost to the system, and will create incentives for firms to provide emergency care, assuming the property rights are well-defined.

Of course, I'm just throwing all this out there. I don't immediately see why this would be so different from pollution, or education vouchers, or any other kind of thing like that. Emergency is a scarce resource; markets allocate scarce resources.

Virtually unpriced ER care certainly is a tragedy of the commons, but immigration legal or otherwise is not to blame. The 1986 rule change for ER care making it a commons likely accounts for much of the shortage of ERs as well as higher costs for other medical services. Similarly, with education, the U.S. has compulsory education laws that require every child to attend school and because public schools are "free," where do you think poor immigrant families will send their children. Immigration is not the problem, unpriced resources are. If compulsory care and attendance laws were done away with, we wouldn't see overuse of resources on such a scale and all of us (natives, immigrants) would learn a valuable economic lesson--there's no such thing as a free lunch or education or hospital visit.

I don't think much of the voucher idea. It looks to me like it solves little or nothing and creates a large administrative burden. What is the difference between vouchers and direct government subsidy of hospital ER's? If the claim is that market forces will significantly improve care I don't buy it. After all, in emergencies the best care is often simply the closest. And if there are choices, and the patient is in position to choose, it seems doubtful that the information available will lead to optimal choices.

And some problems won't go away. What will you do when someone shows up at the ER without a voucher (or unconscious, so you can't tell)? Do you expect someone in need of emergency care to go buy vouchers before coming in?

In general, the reason people don't have health insurance is the cost. Financial concerns will motivate voucher sellers also, and we will be back with the problem of uncompensated care.

I'm sure there's plenty of folks(but a minority of the U.S. population, to be sure) who are absolutely chomping at the bit to go back to the pre-1986 policy. Whatever the validity of the arguments pro or con, however, it's simply not going to happen. We have a sort of de facto situation of universal care. I'd argue that it's an inefficient and wasteful system, and that if we're going to have universal care we might as well try to do it a bit better. The emergency room is the most expensive place to treat anything. What if everyone waiting in the emergency room right now had a primary care physician? Would the wait times drop in half? I don't know, but I'm sure it would be a significant drop.

Going from what we have now to a single payer health care system would be trading one set of problems for another. In its favor, single payer health care compares favorably to the U.S. system in all measures of public health and it's cheaper. I think that as long as we're going to have a universal care system we might as well try to do it for less.

"Emergency medical care in the United States is on the verge of collapse, with the nation's declining number of emergency rooms dangerously overcrowded"

This may be true in some areas. But there are many hospitials where I live where the ERs are seldom crowded and the facilities and care are outstanding. I would venture to say that this is true in most areas of the US. I am sure there are exceptions, like along the southern border or near poor areas of major cities. But I would say the quote above is overly alarmist.

Some hospitals are using a triage system that shulffles non-emergent cases to a minor care clinic staffed primarily by Nurse Practitioners and Physicians Assistants (the physicians are across the hall if needed).

Not a solution but a help.

Financing of indigent care is the real 800 pound gorilla.

Bernard, right. My proposal depends on the problem being a commons problem. And, presumably emergencies are things that cannot be planned very well. A few thoughts.

1. If the price of an emergency is zero, then it does lower the cost of various risky activities at the margin. Therefore, there is a moral hazard problem created by unpriced emergency care. The degree to which this is effective depends upon things like the elasticites of demand for risky behaviors. There is also simple uncertainty which if I understand Frank Knight correctly will stay the same regardless of these prices. Still, pricing emergency care should influence some risk behaviors.

2. Pricing emergency care also would deal with the shortage problem, insofar as it was a realistic mechanism where real transfers to sellers can occur. Even if demand for emergency care is inelastic, supply is not. More doctors can be hired, rooms can be expanded. So, pricing the scarce resource should expand supply even if it has no affect on demand due to the inelastic demand for emergency care.

3. All of this is assuming there are some kinds of market failure in regards to the provision of emergency care and/or US policy is driven by normative rather than economic arguments. I'm not making the argument that the government should be providing emergency care to low income families, but if they do decide to do that, then they do need to price it otherwise it does become a tragedy of the commons with potential moral hazard. So, assuming that, shouldn't we be thinking about market allocations?

Jason.

there is a moral hazard problem created by unpriced emergency care. The degree to which this is effective depends upon things like the elasticites of demand for risky behaviors.

My guess is that this elasticity wrt price is extremely low. Elasticity wrt availability of emergency care is probably a little higher for some things, like risky hobbies. But overall this is surely a small part of the problem. Knowing that care is available if needed might induce you to go rock climbing or something, but will it make you more inclined to drive drunk?

Even if demand for emergency care is inelastic, supply is not. More doctors can be hired, rooms can be expanded.

Yes, but subsidies would also increase supply.

I'm not making the argument that the government should be providing emergency care to low income families, but if they do decide to do that, then they do need to price it otherwise it does become a tragedy of the commons with potential moral hazard. So, assuming that, shouldn't we be thinking about market allocations?

I do think we should provide emergency care to low income families. What I was saying is that I doubt the commons problem would be severe, if ER's really were only used for emergency care. And if it is created by low-income patients who have no alternative sources of non-emergency care, perhaps the solution is to provide such sources.

One possible solution is the commercailization of clinics (my wife get here eye exam and contacts at Wal-Mart).

The biggest problems with emergencies, pseudo-emergencies and illnesses in general are:

1) they are quite random

2) the patient cannot always tell the difference

3) anything outside of normal business hours for physician offices tends to be steered to the Emergency Department (often by family practice docs who are already sleep deprived from being on call).

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