Association between the unemployment rate and inpatient cost per discharge by payer in the United States, 2005-2010

Background: Several reports have linked the 2007-2009 Great Recession in the United States with a slowdown in health care spending and decreased utilization. However, little is known regarding how the recent economic downturn affected hospital costs per inpatient stay for different segments of the population. The purpose of this study was to examine the association between changes in the unemployment rate and inpatient cost per discharge for Medicare and commercial discharges. Methods: We used retrospective data at the Core Based Statistical Area (CBSA)-level from 46 states that contributed to the Healthcare Cost and Utilization Project State Inpatient Databases from 2005 to 2010. Unemployment data was derived from the American Community Survey. An instrumental variable two-stage least squares approach with fixed- or random-effects was used to examine the association between unemployment rate and inpatient cost per discharge by payer because of potential endogeneity. Results: The marginal effect of unemployment was associated with an increase in inpatient cost per discharge for both payers. A one percentage point increase in the unemployment rate was associated with a $37 increase for commercial discharges and a $49 increase for Medicare discharges. Conclusions: We find evidence that the inpatient cost per discharge is countercyclical across different segments of the population. The underlying mechanisms by which unemployment affects hospital resource use however, might differ between payer groups.