By Sayeh Nikpay, India Pungarcher, Austin Frakt
Journal of Health Politics, Policy and Law, Vol. 45, No. 5, October 2020
Published online June 19, 2020
Through the 2000s, high health care spending and growing numbers of uninsured were widely viewed as public policy crises. The Affordable Care Act (ACA) attempts to address both. At the time of its passage, the ACA’s expanded coverage options were expected to have a significant positive impact on the economic conditions of US households through lower spending on premiums and out-of-pocket payments, greater financial security, improved job mobility, and improved health. The ACA was also expected to reduce the growth rate of health care spending. Ten years after its passage, we compare expected and realized effects of the ACA on its key economic outcomes: coverage, access to care, financial security, labor market decisions, health, and health care spending.
Expected Effects of the ACA on Economic Outcomes as Enacted
A goal of the ACA was to achieve near-universal coverage through consumer protective regulation of private health insurance, an individual health insurance mandate, and subsidies in the form of Medicaid expansion for low-income households and tax credits for middle-income households.
According to the CBO, the ACA’s reforms were expected to increase coverage by 32 million Americans by 2019, enhancing financial security through protection from catastrophic health spending while reducing out-of-pocket costs. By improving the quality and affordability of alternatives to employer-sponsored insurance (ESI), the ACA’s coverage gains were also expected to alleviate “job lock,” wherein individuals are discouraged from leaving their job for fear of losing (or paying more for) coverage. The CBO (2014) estimated that the ACA would encourage 2.5 million Americans to leave the labor force by 2023, likely to retire or become self-employed.
The second goal of the ACA was to reduce the nation’s health spending growth rate. The law, as enacted, attempted to reduce health care spending by various means: increased insurer competition, reduced federal tax subsidies for generous ESI plans (the “Cadillac tax,” subsequently repealed), and a host of Medicare and Medicaid payment reforms and reimbursement cuts. Reimbursement cuts were focused mainly on hospitals and Medicare Advantage plans, cuts in the growth rate of payments to providers, and “delivery system reforms” (DSRs), which tie payment to quality and/or spending goals.
The CBO estimated that the ACA would lower federal deficits by $198 billion, and that cost-control provisions would reduce federal spending by approximately $416 billion over 10 years, relative to the status quo. Economists expected that many of these mostly federally focused cost-control measures would have spillover effects on private health spending. Some economists therefore suggested that reforms like those in the ACA could reduce national health spending by $590 billion over 10 years relative to the estimated total national health spending over that period without the ACA, and slow the growth rate of spending by about 10%.
Realized Economic Effects of the ACA
Coverage: Between 2009 and 2018, the uninsured rate decreased from 15.1% to 8.9%, with the largest decrease occurring after implementation of the ACA’s coverage provisions. Between 2013 and 2014, the uninsured rate fell from 13.3% of Americans (41.8 million) in 2013 to 7.9% of Americans (25.6 million) in 2014. The number of Americans with coverage in the individual market increased over this period from 11.4% (35.8 million) to 14.1% (46.1 million), while Medicaid enrollment increased from 17.5% (54.9 million) to 19.5% (61.7 million).
Importantly, the ACA’s coverage gains were not due to the erosion of ESI. The probability of losing ESI changed by less than 1% while rates of gaining nongroup and public coverage among the uninsured increased by 3% and 5%, respectively.
Nevertheless, coverage gains have fallen short of CBO estimates. Most of the discrepancy can be attributed to post-ACA legislative, executive, and judicial actions. Because some states did not expand Medicaid coverage — made optional by a 2012 Supreme Court ruling—2.3 million Americans are without affordable coverage options, too wealthy to qualify for (non-expanded) Medicaid but too poor to qualify for marketplace subsidies. Elimination of the individual mandate by Congress, elevation of nonregulated coverage options by executive order, and regulations that increase barriers to marketplace enrollment such as shortened enrollment periods have further eroded coverage gains. Although the number of individuals enrolled in the ACA’s marketplaces remained relatively stable, falling from 12.2 million to 11.8 million between 2017 and 2018, the uninsured rate did increase 0.5 percentage points, leaving an additional 1.86 million Americans uninsured.
Financial Security and Access to Care: The ACA makes health insurance more affordable to many Americans— especially those with high-cost medical conditions.
With coverage expansion came reduced out-of-pocket spending and increased access to care. Relative to those in nonexpansion states, individuals in Medicaid expansion states are 11% more likely to have no out-of-pocket medical or premium expenditures, have about $1,000 less in past-due debts, are 11% less likely to use payday loans, are 2.8% less likely to file for bankruptcy, and have greater improvement in credit scores. Gaining coverage increases office-based primary care visits by 24.1%, prescription drug use by 19%, and use of certain high-value medical screenings by 9.9–11.6%.
While out-of-pocket spending declined for Americans who gained coverage, per-capita out-of-pocket spending actually increased over all Americans by $3,041 between 2009 and 2018. This increase likely results from higher prevalence of high-deductible health insurance plans, including among those with ESI. The fraction of employees enrolled in a high-deductible plan increased from 8% to 29% between 2009 and 2018. At the same time, the deductible for an average single plan increased by $748.
Labor Market Decisions: Although several studies and the CBO predicted large increases in self-employment and retirement, there is little evidence they materialized. Other than the broad inference that new coverage options under the law may not be sufficiently attractive to draw people out of the labor force (despite predictions to the contrary), it is not clear specifically why. One possibility is that the near-continuous attacks on and erosion of the law’s provisions raised doubts about the durability of its protections.
Health: The preponderance of evidence suggests that health insurance improves health. Therefore, it is not surprising that those who gained coverage through the ACA’s Medicaid expansion or extension of employer-sponsored coverage to young adults saw gains in self-reported health. Two recent studies showed that the ACA’s coverage provisions reduce mortality. Linking mortality and survey data on Americans who were the targets of the ACA Medicaid expansion, Miller and colleagues found that the Medicaid expansion averted 19,200 deaths over its first four years.
Health Care Spending: The ACA was expected to modestly reduce the growth of health spending. Federal Medicare spending growth has slowed from 6.8% in 2009 to 6.4% in 2018, and Medicaid spending growth has slowed from 8.8% to 3.0%, over the same time. However, private spending on health care has increased from 3.5% to 5.8% between 2009 and 2018, and out-of-pocket expenditures have also increased. As a result, national health care spending growth increased from 4% to 4.6%.
In fact, studies suggest that many of the ACA’s delivery system reforms (DSRs) have had only modest effects on spending. ACOs appear to have resulted in a few percentage points of savings to Medicare, but the extent to which these are attributable to the program is debated. The evidence on savings from Medicare Bundled Payments is also mixed. Although the Center for Medicare and Medicaid Innovation has launched 37 new payment models, the effects on spending are unknown.
There are several reasons that the ACA’s DSRs had a modest impact on spending at best. First, the ACA was implemented at the same time as a wave of provider consolidation. The consequence is higher commercial market prices. Second, DSRs relied on provider incentives that may have been underpowered. In other words, the incentive to reduce costs was small relative to the wider health care system’s incentives for volume over value. Additionally, these reforms were often voluntary, meaning that if the targets for savings are too aggressive, nobody will participate. Finally, the cost of implementing the DSRs may have eaten away at modest DSR savings.
The architects of the ACA sought to increase coverage and reduce costs and the law was expected by economists to increase access to care, financial security, and job mobility. Although legislative, executive, and judicial actions subsequent to the law’s passage have weakened it in a variety of ways, gains in coverage, access to care, financial security, and health have been surprisingly durable. Yet, these benefits are not evenly shared. For some low-income individuals in Medicaid nonexpansion states, there is little change in these outcomes from the pre-ACA period. For others, even subsidized marketplace coverage comes with high deductibles and cost sharing that impose significant financial burdens.
The ACA provides coverage to millions of Americans, with documented improvements in health care access, reduced financial burden, and better health. On the whole, there is little evidence it has made a substantial contribution to reducing health care spending, reflecting the fact that we have not figured out a politically feasible way forward on substantial cost control. Medicaid expansion remains uncertain in many states, and the outcome of the 2020 or subsequent elections could bring repeal back into political feasibility.
In many ways, we are in a qualitatively similar position as we were in 2010: uninsurance and financial security remain issues for many Americans, as does health spending. The ACA has changed the status quo—the individual market is dramatically reformed, for example—but it has not resolved key health care issues that have sustained US policy debates and fueled health economics scholarship for decades.
By Don McCanne, M.D.
This important review of the promises and results of the Affordable Care Act shows that there have been some isolated improvements in the various goals for reform, but the overall impact is that ACA “has not resolved key health care issues that have sustained US policy debates and fueled health economics scholarship for decades.”
We still have the most expensive system of all nations, and we still fall far short on crucial goals of a high performance system. The small gains of ACA missed so many of the goals and left in place so many of the profound dysfunctions that it is fair to conclude that ACA has been a miserable failure.
What can we do? There are basically three approaches we can consider. We can repeal ACA and replace it with a system that relies more heavily on markets and individual responsibility; we can build on ACA, or we can replace the health care financing system with single payer Medicare for All.
The conservatives who have contended that we should repeal and replace ACA have been left in the awkward position that there is no functional replacement that would meet their goals of reducing government spending and regulation in health care while ensuring that people would receive the health care that they need. The high costs of health care and the wide gap in income and wealth have made it impossible to provide private sector solutions for the majority of Americans. For everyone to have health care, government transfers (taxes) are critical and regulatory management is essential.
The evolving political momentum seems to be that we should build on ACA, considering that the Republican position on replacement has been discredited, and the Democratic Party leadership has been successful in dismissing single payer reform while favoring the neoliberal approach of building on ACA. But that is why today’s report is so important. ACA has been a failure, so what measures are proposed to build on ACA that could turn it around to achieve the goals of universal coverage, access and affordability?
The Supreme Court transferred more of the control of Medicaid to the states, and the conservative states have demonstrated that they will not adjust their programs to adequately meet the health care needs of low-income individuals and families for which the program was designed. The basic flaw is that, having been designed as a welfare program for the poor, it does not have the political support that a more egalitarian, universal program such as Medicare has (though Medicare is universal only for selected segments of our population, but at least it has a “we’re all in this together when we retire” element to health care coverage). So Medicaid needs to be folded into a comprehensive program that is there for all of us.
Expand subsidies for exchange plans?
The expansion of coverage through government subsidies of private health plans has had only a very modest impact, falling short by leaving tens of millions uninsured, and perpetuating low actuarial value plans that leave many underinsured with subsidies that are dependent on maintaining employment in lower income occupations – obviously a flawed policy concept. Also it leaves in place our very expensive and burdensome administrative complexity that, in total, wastes hundreds of billions of dollars that should be going to health care or toward lowering health care spending. Thus those in the exchange plans should also be folded into a more efficient, comprehensive program that covers all of us.
Continue to rely on employer-sponsored plans?
Over 60 million people leave their employment each year. Employer-sponsored plans are a highly unstable and inequitable method of financing health care.
Reduce eligibility for Medicare to age 60?
Boy does this leave a lot of people out. A few might benefit, but it does very little to correct the deficiencies that are confirmed by today’s report to still exist in spite of a decade under ACA. Even if many of the other measures were enacted (the concept of building on ACA) the profound inefficiencies and inequities in our system would be perpetuated. Medicare itself is still an inadequate program, needing significant improvements that would obviate the need for supplemental coverage such as Medigap or a retirement health benefit.
Offering Medicare as a public option?
Adding one more option to our highly fragmented, dysfunctional financing system leaves in place the profound deficiencies that cry out for reform. Also, the concept of offering Medicare as an additional option leaves unanswered design features such as which risk pool would cover the option and how would that risk pool be funded? If included in the current Medicare risk pool, would the participants be required to share the higher costs of the aged, disabled, and those with chronic renal disease? Rather than having a separate public option, it would be much more logical to fold everyone into one universal program that is funded equitably.
Today’s report on the failure of ACA along with the consideration of bogus replacement plans and grossly inadequate adjustments to ACA really leads to the conclusion that we need to enact and implement a single payer improved version of Medicare for All – a truly universal, comprehensive, efficient, equitable, and affordable plan for everyone.
But Joe Biden says we can’t pay for Medicare for All. Well, he is flat out wrong on that one. Innumerable studies have shown that a well designed single payer system will not cost any more that what we are already spending and would likely cost less. On the other hand, Joe Biden’s proposal leaves in place ACA and the various other programs and builds on them – adding new spending to that which already exists. His proposal costs more than single payer. Yes, Medicare for All shifts more spending to the tax system, but that is more than offset by eliminating private spending of premiums, including employer contributions to their plans, and of out-of-pocket spending for insurance cost-sharing and uncovered services.
This important report should be shared widely since, again, it shows that ACA “has not resolved key health care issues that have sustained US policy debates and fueled health economics scholarship for decades.” With single payer Medicare for All we can finally resolve this issue. It has become an absolute imperative.
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