Financial impact of the Affordable Care Act on hospitals

The Affordable Care Act [ACA] authorized the largest expansion of public health insurance coverage in the U.S. since the mid-1960s. Evidence on the effects of the ACA-induced increase in insurance coverage on patient health and health care providers is still emerging. We deploy administrative data from the universe of general acute care hospitals and emergency rooms in California over 2008-15 and present new empirical evidence on the effects on insurance coverage, health care utilization, and hospital finances. Our empirical approach utilizes regression discontinuity and differences-in-differences research designs, exploiting sharp changes in Medicaid coverage due to age-based eligibility restrictions and pre-ACA variation in un-insurance shares across hospitals and markets. We have three principal findings. First, we find that approximately half of the Medicaid expansion replaced existing county safety-net programs - implying a large transfer from federal taxpayers to those in California. Second, although we find substantial increases in utilization of hospital stays and ER visits as well as sorting toward better quality hospitals, we find no detectable effects on patient health. Third, we find heterogeneous effects on revenue - government owned - safety-net' hospitals experienced large gains in revenue, while gains are modest for private hospitals. Additional revenue does not manifest in improved quality metrics or capital investment.

Author[s]

Mark Duggan

Atul Gupta

Emilie Jackson

Publication Date

May, 2018

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RESEARCH ARTICLES

Young, Gary J. JD, PhD; Flaherty, Stephen PhD; Zepeda, E. David PhD; Singh, Simone PhD; Rosenbaum, Sara JD

professor, Center for Health Policy and Healthcare Research, D’Amore-McKim School of Business, Bouve College of Health Sciences, Northeastern University, Boston, Massachusetts

research associate, Center for Health Policy and Healthcare Research, Northeastern University

assistant professor, Center for Health Policy and Healthcare Research, D’Amore-McKim School of Business, Northeastern University

assistant professor, School of Public Health, University of Michigan

professor, Milken Institute School of Public Health, George Washington University, Washington, D.C.

For more information about the concepts in this article, contact Dr. Young at [email protected]

The authors declare no conflicts of interest.

doi: 10.1097/JHM-D-17-00177

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Abstract

© 2019 Foundation of the American College of Healthcare Executives

  • Atul Gupta
  • Emilie Jackson
  • American Economic Journal: Economic Policy
  • vol. 14, no. 1, February 2022
  • [pp. 111-51]
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Abstract

We exploit changes in the discontinuity in health insurance coverage at age 65 induced by the implementation of the Affordable Care Act to examine effects on coverage, hospital use, and patient health. We then link these changes to effects on hospital finances. We show that a substantial share of the federally funded Medicaid expansion substituted for existing locally funded safety net programs. Despite this offset, the expansion produced a substantial increase in hospital revenue, reflected in an equivalent increase in operating surplus. We do not detect improvements in patient mortality, although the expansion led to substantially greater hospital and emergency room use.

Citation

Duggan, Mark, Atul Gupta, and Emilie Jackson. 2022. "The Impact of the Affordable Care Act: Evidence from California's Hospital Sector." American Economic Journal: Economic Policy, 14 [1]: 111-51. DOI: 10.1257/pol.20190279

Additional Materials

  • Data Set
  • Online Appendix [856.47 KB]
  • Author Disclosure Statement[s] [178.24 KB]

JEL Classification

  • H51 National Government Expenditures and Health
  • H75 State and Local Government: Health; Education; Welfare; Public Pensions
  • I12 Health Behavior
  • I13 Health Insurance, Public and Private
  • I18 Health: Government Policy; Regulation; Public Health
  • I38 Welfare, Well-Being, and Poverty: Government Programs; Provision and Effects of Welfare Programs

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Which was an effect of the Affordable Care Act?

While the ACA did not produce any increase in private coverage, its main private coverage effect was substantially crowding out unsubsidized individual market purchases with heavily government-subsidized exchange plans.

What were the cons of the Patient Protection and Affordable Care Act?

The cost has not decreased for everyone. Those who do not qualify for subsidies may find marketplace health insurance plans unaffordable. ... .
Loss of company-sponsored health plans. ... .
Tax penalties. ... .
Shrinking networks. ... .
Shopping for coverage can be complicated..

What were the main accomplishments of the Affordable Care Act?

The ACA also improved the quality of coverage for people with employer plans, introducing new protections including: prohibitions on annual and lifetime limits on coverage; requirements that plans cap consumers' annual out-of-pocket costs; preventive services [such as immunizations, screenings, and contraception] ...

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