Advertisement

The individual welfare effects of the Affordable Care Act for previously uninsured adults

  • Naomi ZewdeEmail author
Research article

Abstract

The Affordable Care Act (ACA) improved welfare by expanding, subsidizing, and standardizing healthcare coverage. At the same time, the law also penalizes the remaining uninsured and establishes a benchmark private policy that charges premiums and cost-sharing expenses in the non-group market. This paper introduces a conceptual and empirical framework for evaluating the net effects of ACA coverage expansions for the individual welfare of previously uninsured adults. Using restricted-access data from the 2010–2012 Medical Expenditure Panel Survey, I evaluate the short-term welfare effect as a function of health and non-medical consumption. I simulate post-ACA insurance status then evaluate the change in expected medical consumption and the utility of consumption by estimating parameter values for a generalized gamma distribution of the ex-ante spread of healthcare and medical spending for each person. The ACA generates a modest net improvement in individual welfare on average (+ $91). While low-income individuals realize gains (+ $539), all other income-groups realize increasingly large losses. The uninsured majority (65%) realize average losses (− $158). Medicaid beneficiaries realize substantial gains (+ $1309). While in most specifications, exchange enrollees realize average gains (+ $146), just under a quarter (24%) realizes any improvement. The chronically-ill realize substantial gains (+ $1065). The non-chronically-ill majority (71%) realize average losses (− $312). Despite weakly lower risk premiums (− $28), medical spending increases in catastrophic scenarios on average. The ACA improves the welfare of some, especially the low-income and chronically-ill. Medicaid generates unequivocal gains for beneficiaries. Most previously uninsured adults remain uninsured, some of whom pay a penalty. The subsidized cost of ACA private insurance outweighs its benefits for most exchange enrollees.

Keywords

Affordable Care Act Welfare Medicaid Marketplace Exchange Private insurance Deductibles 

JEL Classification

I13 I18 I38 

Notes

Supplementary material

10754_2019_9273_MOESM1_ESM.docx (42 kb)
Supplementary material 1 (DOCX 34 kb)

References

  1. Allen, H., Swanson, A., Wang, J., & Gross, T. (2017). Early medicaid expansion associated with reduced payday borrowing in California. Health Affairs (Project Hope), 36(10), 1769–1776.  https://doi.org/10.1377/hlthaff.2017.0369.CrossRefGoogle Scholar
  2. Basseyn, S., Saloner, B., Kenney, G. M., Wissoker, D., Polsky, D., & Rhodes, K. V. (2016). Primary care appointment availability for medicaid patients: Comparing traditional and premium assistance plans. Medical Care, 54(9), 878.  https://doi.org/10.1097/MLR.0000000000000573.CrossRefGoogle Scholar
  3. Blumberg, L. J., & Holahan, J. (2015). After King v. Burwell: Next steps for the Affordable Care Act. Retrieved January 19, 2018, from https://www.urban.org/research/publication/after-king-v-burwell-next-steps-affordable-care-act
  4. Box-Steffensmeier, J. M., & Jones, B. S. (2004). Event history modeling: A guide for social scientists. Cambridge: Cambridge University Press. Retrieved from http://www.loc.gov/catdir/toc/cam041/2003056923.html
  5. Centers for Disease Control and Prevention. (2017, September 15). Preventive Health Care. Retrieved February 9, 2018, from https://www.cdc.gov/healthcommunication/toolstemplates/entertainmented/tips/PreventiveHealth.html
  6. Clarke, T., Norris, T., & Schiller, J. (2017). Early release of selected estimates based on dta from the 2016 National Health Interview Survey. National Center for Health Statistics. Retrieved from https://www.cdc.gov/nchs/fastats/health-insurance.htm
  7. Congressional Budget Office. (2017). CBO’s record of projecting subsidies for health insurance under the Affordable Care Act: 2014 to 2016 (no. 53094). Washington, DC. Retrieved from https://www.cbo.gov/system/files/115th-congress-2017-2018/reports/53094-acaprojections.pdf
  8. Farley, P. J. (1985). Who are the underinsured? The Milbank memorial fund quarterly health and society, 63(3), 476–503.  https://doi.org/10.2307/3349844.CrossRefGoogle Scholar
  9. Finkelstein, A., Hendren, N., & Luttmer, E. F. P. (2015). The value of medicaid: Interpreting results from the Oregon health insurance experiment. National Bureau of Economic Research, working paper series, no. 21308.  https://doi.org/10.3386/w21308
  10. Finkelstein, A., Hendren, N., & Shepard, M. (2017). Subsidizing health insurance for low-income adults: Evidence from Massachusetts (working paper no. 23668). National Bureau of Economic Research.  https://doi.org/10.3386/w23668
  11. Finkelstein, A., Taubman, S., Wright, B., Bernstein, M., Gruber, J., Newhouse, J. P., et al. (2012). The Oregon health insurance experiment: Evidence from the first year. The Quarterly Journal of Economics, 127(3), 1057–1106.CrossRefGoogle Scholar
  12. Frean, M., Gruber, J., & Sommers, B. D. (2017). Premium subsidies, the mandate, and Medicaid expansion: Coverage effects of the Affordable Care Act. Journal of Health Economics, 53, 72–86.  https://doi.org/10.1016/j.jhealeco.2017.02.004.CrossRefGoogle Scholar
  13. Gabel, J. R., Whitmore, H., Green, M., Stromberg, S., & Oran, R. (2015, December 21). Consumer cost-sharing in marketplace vs. employer health insurance plans, 2015. Retrieved January 17, 2018, from http://www.commonwealthfund.org/publications/issue-briefs/2015/dec/cost-sharing-marketplace-employer-plans
  14. Garrett, B., & Gangopadhyaya, A. (2016). Who gained health insurance coverage under the ACA, and where do they live? Urban Institute. Retrieved from https://www.urban.org/research/publication/who-gained-health-insurance-coverage-under-aca-and-where-do-they-live
  15. Han, X., Nguyen, B. T., Drope, J., & Jemal, A. (2015). Health-related outcomes among the poor: Medicaid expansion vs. non-expansion states. PLoS ONE, 10(12), e0144429.  https://doi.org/10.1371/journal.pone.0144429.CrossRefGoogle Scholar
  16. Handel, B. R. (2013). Adverse selection and inertia in Health Insurance Markets: When nudging hurts. American Economic Review, 103(7), 2643–2682.  https://doi.org/10.1257/aer.103.7.2643.CrossRefGoogle Scholar
  17. Herring, B. (2005). The effect of the availability of charity care to the uninsured on the demand for private health insurance. Journal of Health Economics, 24(2), 225–252.  https://doi.org/10.1016/j.jhealeco.2004.08.003.CrossRefGoogle Scholar
  18. Hinde, J. M. (2017). Incentive(less)? The effectiveness of tax credits and cost-sharing subsidies in the Affordable Care Act. American Journal of Health Economics, 3(3), 346–369.  https://doi.org/10.1162/ajhe_a_00078.CrossRefGoogle Scholar
  19. Internal Revenue Service. (2016). Health savings accounts and other Tax-Favored Health Plans (No. 969). Department of the Treasury. Retrieved from https://www.irs.gov/pub/irs-prior/p969–2015.pdf
  20. Jacobs, P. D., Hill, S. C., & Abdus, S. (2017). Adults are more likely to become eligible for medicaid during future recessions if their state expanded medicaid. Health Affairs, 36(1), 32–39.  https://doi.org/10.1377/hlthaff.2016.1076.CrossRefGoogle Scholar
  21. Levy, H., & DeLeire, T. (2008). What do people buy when they don’t buy health insurance and what does that say about why they are uninsured? Inquiry, 45(4), 365–379.CrossRefGoogle Scholar
  22. Long, S. K., & Dimmock, T. H. (2014, November 25). Health insurance coverage and Health Care Access and affordability in Massachusetts: Holding Steady in 2013. Retrieved July 9, 2018, from https://www.urban.org/research/publication/health-insurance-coverage-and-health-care-access-and-affordability-massachusetts-holding-steady-2013
  23. Mahoney, N. (2015). Bankruptcy as implicit health insurance. The American Economic Review, 105(2), 710–746.  https://doi.org/10.1257/aer.20131408.CrossRefGoogle Scholar
  24. Manning, W. G., Basu, A., & Mullahy, J. (2005). Generalized modeling approaches to risk adjustment of skewed outcomes data. Journal of Health Economics, 24(3), 465–488.  https://doi.org/10.1016/j.jhealeco.2004.09.011.CrossRefGoogle Scholar
  25. Meier, S. K. (2016). Examining risk classification strategies for the development of a measure of medical care economic risk in the United States. Journal of Economic and Social Measurement, 41(3), 289–305.  https://doi.org/10.3233/JEM-160430.CrossRefGoogle Scholar
  26. Obama, B. (2016). United states health care reform: Progress to date and next steps. JAMA, 316(5), 525–532.  https://doi.org/10.1001/jama.2016.9797.CrossRefGoogle Scholar
  27. Pauly, M., Leive, A., & Harrington, S. (2018). Losses (and gains) from health reform for non-medicaid uninsureds. Journal of Risk and Insurance.  https://doi.org/10.1111/jori.12255.Google Scholar
  28. Pearson, C. F. (2015, March 25). Exchanges struggle to enroll consumers as income increases. Retrieved November 27, 2017, from http://avalere.com/expertise/managed-care/insights/exchanges-struggle-to-enroll-consumers-as-income-increases
  29. Polyakova, M., Hua, L. M., & Bundorf, M. K. (2017). Marketplace plans provide risk protection, but actuarial values overstate realized coverage for most enrollees. Health Affairs, 36(12), 2078–2084.  https://doi.org/10.1377/hlthaff.2017.0660.CrossRefGoogle Scholar
  30. Shi, L., Feng, C., Griffin, S., Williams, J. E., Crandall, L. A., & Truong, K. (2017). Does awareness of the Affordable Care Act reduce adverse selection? A study of the long-term uninsured in South Carolina. INQUIRY: The Journal of Health Care Organization, Provision, and Financing, 54, 0046958017727103.  https://doi.org/10.1177/0046958017727103
  31. Sommers, B. D., Baicker, K., & Epstein, A. M. (2012). Mortality and access to care among adults after state medicaid expansions. New England Journal of Medicine, 367(11), 1025–1034.  https://doi.org/10.1056/NEJMsa1202099.CrossRefGoogle Scholar
  32. Sommers, B., Kronick, R., Finegold, K., Po, R., Schwartz, K., & Glied, S. (2015). Understanding participation rates in medicaid: Implications for the Affordable Care Act. Retrieved from https://aspe.hhs.gov/basic-report/understanding-participation-rates-medicaid-implications-affordable-care-act
  33. Thorpe, K. E., Allen, L., & Joski, P. (2015). Out-of-pocket prescription costs under a typical silver plan are twice as high as they are in the average employer plan. Health Affairs, 34(10), 1695–1703.  https://doi.org/10.1377/hlthaff.2015.0323.CrossRefGoogle Scholar
  34. Uberoi, N., Finegold, K., & Gee, E. (2016). Health insurance coverage and the Affordable Care Act, 20102016 (issue brief). ASPE. Retrieved from https://aspe.hhs.gov/pdf-report/health-insurance-coverage-and-affordable-care-act-2010-2016

Copyright information

© Springer Science+Business Media, LLC, part of Springer Nature 2019

Authors and Affiliations

  1. 1.Graduate School of Public Health and Health PolicyCity University of New YorkNew YorkUSA

Personalised recommendations