Economic Effects of the Affordable Care Act

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March of 2010 the federal government passed the Patient Protection and Affordable Care Act (PPACA), otherwise known as the Affordable Care Act (ACA). Since that time the ACA has been hotly debated by people of all political affiliations. Some argue how positive the outcomes have been and other seek to prove how the law is unfair, too costly or ineffective. The original intent of the legislation was for more people to afford medical insurance and reduce the overall cost of medical care. The three primary goals of the law are: Make affordable health insurance available to more people. The law provides consumers with subsidies (premium tax credits) that lower costs for households with incomes between 100% and 400% of the federal poverty level. Expand the Medicaid program to cover all adults with income below 138% of the federal poverty level. Support innovative medical care delivery methods designed to lower the costs of health care generally. (Affordable Care Act (ACA) - Glossary. (n.d.), n.d.) This paper examines the economic research of the three primary goals to determine how well the law is meeting its goals. The first goal of the ACA was to make health insurance affordable and thereby assessable to more people. In researching this goal, it was found to be multi-factorial and one that was highly debated as potentially being an economic drain to individuals. The debates centered around the employer mandates with some concerned employers would reduce cut positions or cur workers to part-time status in order to avoid the fifty full-time employee level. Although workers economic status would potentially be hurt by these cuts the insurance exchanges would have been helped as these workers would seek health insurance there instead of with their employers. This leads to another point in the research. Insurance exchanges, or marketplaces, were developed with the goal of spreading the risk between healthiest and sickest people thereby reducing the cost of health insurance overall. Looking at research on employment trends in the years following the enactment of the ACA it was discovered, the U.S. equal to or surpassed other high-income counties in economic growth. It was also found that employment growth was up with 13.4 million more people were employed than in March 2010, when the ACA was enacted (Schoen, 2016). Schoen's (2016) study also found the following: Full-time jobs have accounted for all of the net job growth since March 2010. Although some critics feared that employers would convert full-time positions to part-time ones to avoid the health insurance requirements that apply to full-time jobs has improved markedly. Moreover, the number of people working part-time who would prefer full-time work has declined by 3 million since 2010. (p. 12) While the employment rate points to an economic win for employees, research also suggests this to be part of the negative effects of the health insurance exchanges. With an increase in employment rates, more people are obtaining insurance through employer-sponsored health insurance plans. This decreases the number of people seeking health insurance through the exchanges. These people are also likely some of the healthier people needed to offset the costs of the sicklier people. Research has also pointed to attrition as a big reason for the instability of the marketplaces. What was found was that people would drop out after one month of coverage or after they obtained care for non-chronic conditions. Given the option of paying a year of health insurance or paying a minimal fine, many people have found it cheaper to pay the fine. This behavior has created a situation for the health insurance companies where they find it difficult to set prices. If they set the price low but not enough healthy people pay the year, they are likely to operate at a loss. Balancing this situation has put the health insurance marketplace in a very unstable position (High Attrition May Make ACA Health Insurance Markets Unstable, 2018). The second goal was to expand the Medicaid program. States which chose to participate in the Medicaid expansion were provided federal monies to help offset state costs associated with the increased Medicaid enrolls. According to research, increased Medicaid participation accounted for a decreased in uninsured visits to the ER, increase in early diagnosis of cancer and overall better care provided to these low-income patients. These patients also worried less about unexpected healthcare costs. Studies also showed overall economic growth including savings in the state budget and gains in revenue. As the federal monies begin to decrease to these states, they will need to find alternative funds to maintain the increased number of Medicaid participants. Some states have looked at using provider taxes and fees to help offset costs (Antonisse, 2018). Finding ways to lower health care costs was the third goal. The framers of the ACA sought ways to encourage providers to achieve better health outcomes at reduced cost (Schoen, 2016). In 2012 the Hospital Readmission Reduction Program (HRRP) was added. This program attempts to address a quality measure, but at the same time could help lower the cost curve. This program looks at 30-day hospital readmission rates for specific diagnoses. Hospitals are penalized if they are found to have high rates of readmission for these specific diagnoses (McIlvennan, 2015). The first year realized penalties of 0.3% of total Medicare payments to hospitals. This was well below the original estimate. The average penalty decreased from 0.42 to 0.38% in the second year with it increasing to 0.63% in year three. Some of the increase could be attributed to the inclusion of two new diagnoses (McIlvennan, 2015). For hospitals attempting to find ways to improve outcomes and reduce readmissions much time and money has been spent implementing or improving transitional care. These interventions could include ensuring patient are discharged on optimal medications with appropriate instruction, securing early outpatient follow up care and telephone calls in ensure patient status and compliance with treatment. While all of these options have the potential to reduce readmissions and the associated fines, some do require money to be spent by the hospital in wages to higher staff to do such things as make phone calls. While the features in the ACA addressing lowering health care costs appear to be making strides there are alternative areas which could undo the reduced costs realized to this point. According to Schoen (2016) these include: Rising costs of prescription drugs. A lull in development of new breakthrough prescription drugs and the expiration of patents for several high-cost medications during recent years have both contributed to the spending slowdown in the first part of this decade. But there are multiple warning signs that this trend may be ending including the $82,000 price tag for treatment with an effective new drug for hepatitis C, the availability of new cancer drugs, and rapid increases in prices for even generic medication. A key question is whether the United States will be able to implement more value-pricing for existing and new drugs while also promoting innovation and limiting monopolistic pricing. Consolidation of providers and insurers through mergers and acquisitions. Vertical or horizontal provider consolidation could push prices up, even if the use of health services decreases. This is especially true in markets with multiple, nondominant payers. The greater market power achieved through consolidation also could help providers maintain the higher prices from private insurers gained in previous years. At the same time, mergers of insurers pose the danger of raising premiums and the prices paid for care. Administrative layers and complexity. Public and private health care payers and regulatory agencies use different, often changing payment methods and require separate reporting on an expanding array of metrics there is concern that the proliferation of payment changes and reporting requirements are adding to administrative costs and diverting time and resources away from the delivery of care. The U.S. health system already has among the highest administrative costs in the world; the challenge is how to reduce the excess costs stemming from the U.S. health insurance system's inherent fragmentation. (p. 19) This information shows there is still work that can be done in regard to continuing reduction of the costs associated with health care. Whether it be finding ways to reduce prescription costs or ensuring economic conditions exist to reduce the likelihood of hospitals, insurance companies or drug companies merging and becoming more monopolistic in nature. This research has shown the ACA has had many positive economic effects of both individuals and reducing health care costs. It also shows there is still work that can be done to further improve outcomes and reduce costs for individuals, insurance companies and providers. Continued research should be done to ensure costs savings are not accounting for increased mortality rates or other negative situations.
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Economic Effects of the Affordable Care Act. (2019, Aug 08). Retrieved February 23, 2024 , from

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