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Health Reform To Cut Out-of-Pocket Costs for Newly Insured

Health IT (AHRQ)

(Agency for Healthcare Research and Quality)

A new study from the Rand Corporation shows health care costs will decline for most people, particularly those newly insured or changing their plans under the Affordable Care Act, the U.S. health reform law. The impact of the law is expected to vary, however, with newly insured consumers having higher incomes and thus ineligible for subsidies most likely to see their total spending for health care rise.

The Rand team estimates out-of-pocket health care costs using its Comprehensive Assessment of Reform Efforts (COMPARE) simulation program that gauges the impact of health policy decisions. The model uses a synthetic data set with information on a U.S. national representative sample of individuals and employers, and simulates decisions based on a combination of economic scenarios and hard data from smaller-scale experiences.

The authors, led by Rand economist Christine Eibner, estimate the effects of federal and state policy decisions on premium payments as well as out-of-pocket costs — co-pays and deductibles — in 2016 for people becoming newly insured and those changing their source of health insurance.  In addition, the researchers simulate the impact of the Affordable Care Act on out-of-pocket spending and risk of catastrophic health costs of low-income people in Texas and Florida, two large states that decided, at least so far, not to expand their Medicaid rolls.

Consumers likely to experience the largest reductions in health care costs will be the 11.5 million newly insured people under an expanded Medicaid program, who will see their annual out-of-pocket costs fall from $1,63 to $34. These consumers will also see the risk of spending at least 10 percent of their incomes on medical costs drop from 45 to 5 percent.

In states where Medicaid is not expanded, low-income residents will likely see their health care costs rise, compared to what would have occurred if the states expanded Medicaid. Texas residents below the federal poverty level who do not qualify for Medicaid, for example, will like face out-of-pocket costs of  $1,831 a year, compared to $28 if they had Medicaid.

People who become newly insured on the individual market and have incomes more than four times the federal poverty level — the cut-off line for subsidies under the Affordable Care Act — will likely experience the largest increases in out-of-pocket health costs. These 3.3 million consumers, according to Rand’s model, can expect to pay $7,202 for health care under the Affordable Care Act, compared to $5,368 if the law had not gone into effect.

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