Today, the Mercatus Cetner released a new policy brief  by Tami Gurley-Calvez on Medicaid reforms implemented in West Virginia, based on a working paper  she wrote this fall. In 2007 the state enacted a Medicaid redesign with one objective being to reduce the rate at which Medicaid patients visited emergency rooms for non-emergencies. Additionally, the plan, called Mountain Health Choices, was intended to incentivize healthy behaviors among Medicaid recipients.
The “choice” in the new plan was an option for women and children to opt into an enhanced plan or default into a basic plan. The enhanced plan offered greater benefits but required participants to agree to “doing [their] best to stay healthy’ and to agree to visit their primary care physician for non-emergency treatment. The objective of reducing ER visits was to both reduce healthcare costs for state taxpayers and to improve healthcare outcomes.
Gurley-Calvez finds that with the Mountain Health Choices reforms, patients on this enhanced plan did visit the emergency room at lower rates. However, patients who defaulted into the basic plan began to visit the emergency room at a higher rate, potentially because they were not eligible for treatment for some illnesses with a primary care doctor. She explains:
Based on this research, states should consider whether they can create a greater connection between health providers and members’ involvement in their own health care. However, policymakers must be cognizant of what drives member decision making in their policy designs. In the West Virginia case, a majority of members did not enroll in the enhanced plan in the short term despite additional health coverage and no direct monetary costs to enrollment. Further, states should consider the possible costs, both near term and future, of restricting treatment options by limiting coverage levels.
This case of attempted cost savings by changing incentives represents an ever-present challenge in public policy. Predicting how people will react to new policies in a changing world is difficult, and policymakers should not be overly confident that the incentives that they design will result in the outcomes that they anticipate.