Duke 2008 | ASHE | Equity and Efficiency in Health and Healthcare

The literature on equity-efficiency tradeoffs in healthcare includes little evidence of efficiency-enhancing policies improving equity. This paper examines equity concerns in terms of access to psychiatric care and economically motivated patient transfers (dumping) during a time period dominated by efficiency-driven policy reforms. Between 1987 and 1997, budgetary pressures led to mental health policy reforms in California's Medicaid program, including the 1991 'Program Realignment', which successfully contained cost of mental health services. Simultaneously, private payers restricted access to inpatient substance abuse treatment, moving much of this care to outpatient settings. These market changes encouraged withdrawal from all psychiatric and substance abuse care by some hospitals and a search for patients to fill their beds by others. We examine the impact of these changes on initial admission and subsequent transfer of Medicaid patients.

Using 1987 and 1997 hospital discharge and financial reporting data from California Office of Statewide Health Planning and Development, we assess responses of hospitals in terms of inpatient admissions, patient-payer mix, and diagnosis. We estimate market area of each hospital using a variable radius measure defined by 90% of its admissions. The final sample included 67,349 patients with primary psychiatric diagnosis in 1987 and 61,082 in 1997, and matching data on 291 hospitals in 1987 and 151 in 1997. Analysis of 'dumping' uses similar discharge data in addition to matched hospital data from American Hospital Association. We employ conditional logit models to study patient choice and multinomial logit models to study transfers.

We find a substantial (almost 50%) drop in the number of hospitals providing psychiatric services and 10% drop in psychiatric and substance-abuse admissions between 1987 and 1997. Substance abuse admissions declined from 40% of psychiatric admissions in 1987 to 26% in 1997. While declining number of hospitals reduced the set of choices for all patients, there was a relative increase in the choice-set of Medicaid patients compared to private. Inpatient psychiatric admissions for Medicaid in For-Profit hospitals increased from 10% in 1987 to 34% in 1997. Much of this growth in market share appears to be a substitution from public hospitals, whose Medicaid market share declined from 45% to 19%. By 1997 Medicaid patients were less likely to use public hospitals, choosing instead for-profit hospitals. Transfers increased from 3% to 4%, among Medicaid patients and from 4% to 5% among private. We find a statistically significant increase in the relative risk of Medicaid patients (relative to private) being transferred to For-Profit hospitals and a significant decrease in that of being transferred to Public hospitals from For-Profit Psych hospitals. This change reflects an increased willingness of For-profit hospitals to accept and keep Medicaid patients.

While the reforms reduced the number of hospitals providing inpatient psychiatric services, it also made Medicaid patients more attractive to private providers. Further, we find no evidence of 'patient dumping' among Medicaid patients. These results suggest that the reforms, in addition to improving efficiency as suggested by others, might have also succeeded in doing so without compromising equity in terms of access to care.