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

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  • Naomi Zewde

    (City University of New York)

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.

Suggested Citation

  • Naomi Zewde, 2020. "The individual welfare effects of the Affordable Care Act for previously uninsured adults," International Journal of Health Economics and Management, Springer, vol. 20(2), pages 121-143, June.
  • Handle: RePEc:kap:ijhcfe:v:20:y:2020:i:2:d:10.1007_s10754-019-09273-y
    DOI: 10.1007/s10754-019-09273-y
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    References listed on IDEAS

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    1. Frean, Molly & Gruber, Jonathan & Sommers, Benjamin D., 2017. "Premium subsidies, the mandate, and Medicaid expansion: Coverage effects of the Affordable Care Act," Journal of Health Economics, Elsevier, vol. 53(C), pages 72-86.
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    Blog mentions

    As found by EconAcademics.org, the blog aggregator for Economics research:
    1. Chris Sampson’s journal round-up for 13th July 2020
      by Chris Sampson in The Academic Health Economists' Blog on 2020-07-13 11:00:06

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    More about this item

    Keywords

    Affordable Care Act; Welfare; Medicaid; Marketplace; Exchange; Private insurance; Deductibles;
    All these keywords.

    JEL classification:

    • I13 - Health, Education, and Welfare - - Health - - - Health Insurance, Public and Private
    • I18 - Health, Education, and Welfare - - Health - - - Government Policy; Regulation; Public Health
    • I38 - Health, Education, and Welfare - - Welfare, Well-Being, and Poverty - - - Government Programs; Provision and Effects of Welfare Programs

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