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

Naomi Zewde ()
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Naomi Zewde: City University of New York

International Journal of Health Economics and Management, 2020, vol. 20, issue 2, No 1, 143 pages

Abstract: 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 (search for similar items in EconPapers)
JEL-codes: I13 I18 I38 (search for similar items in EconPapers)
Date: 2020
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DOI: 10.1007/s10754-019-09273-y

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