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Has the affordable care act affected health care efficiency?

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  • Russ Kashian

    (University of Wisconsin - Whitewater)

  • Nicholas Lovett

    (University of Wisconsin - Whitewater)

  • Yuhan Xue

    (University of Wisconsin - Whitewater)

Abstract

We utilize health care input and output data to evaluate how state-level efficiency in health care has changed in the wake of the Affordable Care Act (ACA). We use a Stochastic Frontier model to estimate annual measures of technical and cost efficiency before, and after, ACA implementation. Results show that following the ACA, states’ technical efficiency scores improved and converged across states. However, cost efficiency scores declined suggesting health outputs rose by a proportionally smaller margin than health care costs. We further investigate efficiency changes for ACA-induced Medicaid expansions. We find Medicaid expansion led to decreased cost efficiency scores, but may have led to increased technical efficiency scores. Overall, results suggest the ACA represents a package of reforms that present a trade-off between technical and cost efficiency.

Suggested Citation

  • Russ Kashian & Nicholas Lovett & Yuhan Xue, 2020. "Has the affordable care act affected health care efficiency?," Journal of Regulatory Economics, Springer, vol. 58(2), pages 193-233, December.
    • Handle: RePEc:kap:regeco:v:58:y:2020:i:2:d:10.1007_s11149-020-09417-w
    DOI: 10.1007/s11149-020-09417-w
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    More about this item

    Keywords

    Affordable care act; Efficiency; Health care; Stochastic frontier analysis;
    All these keywords.

    JEL classification:

    • D61 - Microeconomics - - Welfare Economics - - - Allocative Efficiency; Cost-Benefit Analysis
    • I11 - Health, Education, and Welfare - - Health - - - Analysis of Health Care Markets
    • I18 - Health, Education, and Welfare - - Health - - - Government Policy; Regulation; Public Health
    • L51 - Industrial Organization - - Regulation and Industrial Policy - - - Economics of Regulation

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