Giving people up to $400 cash per month can dramatically lower their number of emergency room visits and hospitalizations, especially for mental health and substance abuse issues.
That’s the finding of a new study looking at a no-strings-attached cash benefits program, which randomly selected some 2,000 people in a struggling community to receive unrestricted aid during the darkest parts of the pandemic.
“What we think is going on here is that by relieving financial stress, by improving economic resilience, people don't go to the emergency department as much for depression, anxiety, suicidal ideation, substance abuse,” said Dr. Sumit Agarwal, lead author of the study published in JAMA (a journal of the American Medical Association) this week.
“There's a pervasive belief out there that if you get low-income people cash, they’ll spend it on drugs and alcohol. And I think this is one of the most rigorous pieces of evidence to show that that's not necessarily the case.”
A COVID-era lottery for $400 cash per month
The city of Chelsea, Massachusetts, was in crisis.
It was 2020. The town of about 40,000 just north of Boston was hit hard especially by the pandemic: one of the poorest areas in the state, with a high share of immigrant and undocumented residents living in densely packed housing, the city’s unemployment rate reached over 20% as restaurant and service industry jobs disappeared overnight. COVD-19 rates were among the highest in Massachusetts.
For months, the city was running pop-up food pantries and home delivery services, giving away as many as 800 to 900 boxes of food per day and thousands of prepared meals a week. But it still wasn’t enough. “As of January 2021, it was still common to see queues forming that were more than 600 feet in length,” according to an analysis from the Harvard Kennedy School’s Rappaport Institute for Greater Boston. And running an operation of that scale wasn’t sustainable, with limited municipal resources already stretched thin.
So the city tried something radically different: any city resident could enter a lottery, with some 2,000 randomly selected winners (representing about 15% of households in the city) receiving up to $400 a month in prepaid Visa debit cards. The program, called Chelsea Eats, had no restrictions on how the cash could be spent.
People spent most of money on food, with 65% of the $6 million dollars spent going to grocery stores and other places that sold food, according to the Rappaport Institute analysis:
“We find that the treatment group had higher food expenditures, greater consumption of fish and fresh meat, and greater food satisfaction than the control group. The treatment group also had lower levels of financial distress. In early months of the program, we observed a decline in food insecurity for the treatment group compared with the control group, but that difference did not persist. There were no statistically significant treatment-control differences in … self-reported physical/mental health and child school attendance. Receiving the cash cards did not reduce employment or hours of work.”
Fewer ER visits, hospitalizations for people receiving cash
Those who received the extra cash were also less likely to go to the ER or be hospitalized, and were more likely to get care from a medical specialist, according to the study. Using electronic health record data, researchers found a 62% drop in behavioral health related ER visits, and a stunning 87% drop in substance-use related visits. Overall ER visits resulting in hospitalizations also decreased 42%.
And people were more likely to get care from specialists, even though those visits likely required more travel, Agarwal said.
“Access to subspecialty care is not as good in Chelsea, you have to come into downtown Boston and take off a significant portion of your day, and cash helps with that,” he said. “Cash helps with transportation, helps with parking, helps with copays. And so that might be driving that result is seeing those increased visits to the subspecialists.”
The study also suggests that providing cash benefits could actually save the health system money:
“Assuming $16,903 for the typical cost of a hospitalization, $757 for an emergency department visit, and $122 for an outpatient visit, the cash benefit could have resulted in net savings to the overall health care system of approximately $450 per person over 9 months,” the study found. “These savings would cover approximately one-sixth to one-seventh of the debit cards’ costs and could be as much as half of the debit cards’ total costs to the extent that some benefits accrue to other members of the family (given a mean family size of 3 in the study) or persist beyond 9 months.”
The overall findings could help combat the belief that low-income people can’t be trusted to use cash aid wisely, Agarwal said. He points to those like Senator Joe Manchin, the Democrat from West Virginia who killed the expanded child tax credit after reportedly citing private fears that parents would use the money to buy drugs.
“I think this is one of the most rigorous pieces of empirical evidence to show that it's not the case, because we saw that big reduction in use of the emergency for substance use disorder,” Agarwal said. “So I think it kind of counters that narrative out there.”
