Hospitals as Insurers of Last Resort

Craig Garthwaite, Tal Gross, Matthew J. Notowidigdo

NBER Working Paper No. 21290
Issued in June 2015
NBER Program(s):Health Care, Public Economics

American hospitals are required to provide emergency medical care to the uninsured. We use previously confidential hospital financial data to study the resulting uncompensated care, medical care for which no payment is received. We use both panel-data methods and case studies from state-wide Medicaid disenrollments and find that the uncompensated care costs of hospitals increase in response to the size of the uninsured population. The results suggest that each additional uninsured person costs local hospitals $900 each year in uncompensated care. Similarly, the closure of a nearby hospital increases the uncompensated care costs of remaining hospitals. Increases in the uninsured population also lower hospital profit margins, which suggests that hospitals cannot simply pass along all increased costs onto privately insured patients. For-profit hospitals are less affected by these factors, suggesting that non-profit hospitals serve a unique role as part of the social insurance system.

download in pdf format
   (1162 K)

email paper

A non-technical summary of this paper is available in the October 2015 NBER Digest.  You can sign up to receive the NBER Digest by email.

Machine-readable bibliographic record - MARC, RIS, BibTeX

Document Object Identifier (DOI): 10.3386/w21290

Published: Craig Garthwaite & Tal Gross & Matthew J. Notowidigdo, 2018. "Hospitals as Insurers of Last Resort," American Economic Journal: Applied Economics, vol 10(1), pages 1-39. citation courtesy of

Users who downloaded this paper also downloaded* these:
Dobkin, Finkelstein, Kluender, and Notowidigdo w22288 The Economic Consequences of Hospital Admissions
Atkin, Chaudhry, Chaudry, Khandelwal, and Verhoogen w21417 Organizational Barriers to Technology Adoption: Evidence from Soccer-Ball Producers in Pakistan
Dranove, Garthwaite, and Ody w18853 How do Hospitals Respond to Negative Financial Shocks? The Impact of the 2008 Stock Market Crash
Currie, MacLeod, and Van Parys w21218 Physician Practice Style and Patient Health Outcomes: The Case of Heart Attacks
Finkelstein, Hendren, and Luttmer w21308 The Value of Medicaid: Interpreting Results from the Oregon Health Insurance Experiment
NBER Videos

National Bureau of Economic Research, 1050 Massachusetts Ave., Cambridge, MA 02138; 617-868-3900; email:

Contact Us