Tuesday, March 7, 2023
Topic: Policy
Content Type: Analysis
Keywords:
Healthcare, ACA
Did ACA Produce Free Healthcare?
An interesting observation was bouncing around Twitter over the weekend.
Fabulous point... in 2010 when Obamacare passed, health care was 17% of GDP and uninsured rate was 16%
— Timothy McBride (@mcbridetd) March 5, 2023
Today? health care 17% of GDP and uninsured rate is lowest ever: 8%!
See: https://t.co/athQpfpkww https://t.co/Q0SD1ObscA https://t.co/h8qMMiWVyg pic.twitter.com/CrEscJ8C4P
Left-leaning opiners are quick to attribute the success to the ACA, but it's not at all clear from the graph that this is what's happening.
Going back to 1990, the trend seems to be a sharp increase during recessions and then a gentle decline during expansions. This is true for 25 years up to 2015, when there's a slight bump up. Then, it begins another gentle decrease until the pandemic when it goes crazy. This graph certainly doesn't show that the ACA reduced health care costs.
But it's still an interesting observation that coverage is higher than it was despite the overall costs falling to pre-ACA levels. Despite the attempted attribution to the last major Democratic accomplishment, the cause is very difficult to pin down. The pandemic caused once-in-a-lifetime shocks to both healthcare and the economy. On the latter, there was a sharp decrease in GDP early-on, followed by an enormous stimulus that resulted in a quick economic recovery and then went on to cause a boom in demand that raised prices.
In healthcare, there was an immediate increase in demand for those who contracted Covid, but otherwise a sharp drop in healthcare demand as hospitals were not allowed to see non-Covid patients. Furthermore, policy changes in Medicaid and subsidies for the ACA upended the traditional coverage breakdown and also high employment would generally mean higher coverage through Americans' workplaces.
Two potential causes are services like telehealth, which is a lower-cost health care service, but this seems too small to account for a 2% of GDP drop in healthcare costs. A more likely cause is a shift from commercial to Medicaid. Medicaid reimbursements are infamously lower than commercial, so if more people switch from commercial insurance to Medicaid, high coverage rates would be achieved at lower cost.
The downside of this would be that providers would lose enormous sums of revenue. This can be tested by digging into the National Health Expenditures data.
The other potential cause is that healthcare coverage doesn't really mean anything. It's important to remember that having insurance does not necessarily equate to using healthcare services. Unless you have a chronic condition, visiting a doctor is a sporadic event. From 2001 to 2011 (for some reason the Obama Administration decided to stop producing these reports), the Census put out information on healthcare utilization. In 2011, the last available, 26% of people did not visit a medical provider at all; only 8% spent a night in the hospital; 57% did not take any prescription drugs.
Perhaps coverage increased, but it did not produce an increase in utilization. In fact, this theory is supported by the other graph in the Tweet.
Most of the drop in uninsured occurred in 2013. This marked the year both when subsidies kicked in for the healthcare exchanges and also when Medicaid expansion kicked in for the states that expanded.
But was there a simultaneous increase in healthcare costs? Looking back at the healthcare cost graph for 2013-2014, if anything, it shows a slight decline. This suggests that the explanation for the coverage/cost conundrum is that they are not strongly-linked. Particularly for Americans who are currently uninsured. It is a criminally under-reported fact that many who are not insured choose not to be despite having access to free or subsidized coverage.
Lastly, this entire observation may be ephemeral. The original graph of costs is not from CMS or a government agency, and thus is not the official value, but a non-profit organization's attempt to recreate it on a monthly basis. Their numbers are not quite the same as CMS for the years where they overlap, and notice that the graph goes into 2022, data unavailable through CMS. This wouldn't be the first time that pundits were quick to react to partial information that proved their point and then were proven wrong.