Efficiency of American states after implementation of the patient protection and affordable care act (PPACA) from 2014 to 2017

Richard Gearhart and Nyakundi Michieka ()

Applied Economics, 2020, vol. 52, issue 18, 1959-1972

Abstract: We assess the impact of healthcare efficiency among U.S. states after implementation of the PPACA. A Malmquist Index decomposes productivity changes of state healthcare systems since 2014. Results indicate productivity regression of 0.14-percentage points from 2014 to 2017. In 2017 the average state is 4.9-percentage points inefficient. Using the conditional order-m estimator and nonparametrically regressing the ratio of conditional to unconditional order-m efficiency scores on secondary environmental variables, we find that behavioural, socioeconomic, and healthcare utilization factors play a role in explaining state inefficiency. The average state becomes nearly fully efficient after controlling for behaviour (efficiency improves by 3.7-percentage points), socioeconomic (4.1-percentage points), and healthcare utilization (3.2-percentage points) variables. Using a second-stage regression framework, we find that higher levels of obesity, adult smoking, and diabetes lead to lower healthcare efficiency. Likewise, we see that low and high levels of unemployment are associated with improved healthcare efficiency, which is in line with contradictory studies. We also find further support for the link between income and health outcomes, through the vehicle of improved health efficiency. Lastly, we find that ensuring that low-cost populations engaging in health treatments have improved health outcomes, as they prevent high-cost morbidities in the future.

Date: 2020
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DOI: 10.1080/00036846.2020.1730758

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