Evaluating Child Health Plus in upstate New York: how much does providing health insurance to uninsured children increase health care costs?

BACKGROUND: In response to the increase in the number of American children without health insurance, new federal and state programs have been established to expand health insurance coverage for children. However, the presence of insurance reduces the price of care for families participating in these programs and stimulates the use of medical services, which leads to an increase in health care costs. In this article, we identified the additional expenditures associated with the provision of health insurance to previously uninsured children.

METHODS: We estimated the expenditures on additional services using data from a study of children living in the Rochester, New York, area who were enrolled in the New York State Child Health Plus (CHPlus) program. CHPlus was designed specifically for low-income children without health insurance who were not eligible for Medicaid. The study sample consisted of 1910 children under the age of 6 who were initially enrolled in CHPlus between November 1, 1991 and August 1, 1993 and who had been enrolled for at least 9 continuous months. We used medical chart reviews to determine the level of primary care utilization, parent interviews for demographic information, as well as specialty care utilization, and we used claims data submitted to CHPlus for the year after enrollment to calculate health care expenditures. Using this information, we estimated a multivariate regression model to compute the average change in expenditures associated with a unit of utilization for a cross-section of service types while controlling for other factors that independently influenced total outpatient expenditures.

RESULTS: Expenditures for outpatient services were closely related to primary care utilization-more utilization tended to increase expenditures. Age and the presence of a chronic condition both affected expenditures. Children with chronic conditions and infants tended to have more visits, but these visits were, on average, less expensive. Applying the average change in expenditures to the change in utilization that resulted from the presence of insurance, we estimated that the total increase in expenditures associated with CHPlus was $71.85 per child in the year after enrollment, or a 23% increase in expenditures. The cost increase was almost entirely associated with the provision of primary care. Almost three-quarters of the increase in outpatient expenditures was associated with increased acute and well-child care visits.

CONCLUSIONS: CHPlus was associated with a modest increase in expenditures, mostly from additional outpatient utilization. Because the additional primary care provided to young children often has substantial long-term benefits, the relatively modest expenditure increases associated with the provision of insurance may be viewed as an investment in the future.