Mark Duggan
Professor of Business Economics and Public Policy
The Wharton School at the University of Pennsylvania
The Economic Impact
of the Affordable Care Act
Key Economic Impacts of the ACA
+ Less “job lock”
+ Lower tax on small business
+ Slower growth in health care costs
+ Lower federal deficit & higher wage growth
- Phase-out of subsidies in exchanges
- Increase in marginal tax rates
- Employer mandate thresholds
- 50 full-time workers and 30 hours for full-time
120%
ESI Offer Rates were Declining Pre-ACA (KFF data)
97%
100%
99%
98%
95%
91%
87%
80%
80%
Offer Rate
72%
60%
2000
2009
57%
46%
40%
20%
0%
3-9
10-24
25-49
Employer Size
50-199
200+
Subsidy Phase-Out and Cliff Lowers Work Incentives
$14,000
$12,000
Subsidy
$10,000
$8,000
$6,000
$4,000
$2,000
$0
$22,000
$33,000
$44,000
$55,000
$66,000
Family Income
$77,000
$88,000
$99,000
Which Dominates Important Given Employment Trends
Employment-to-Population Ratio for U.S. Residents Ages 16+ (BLS)
Will ACA Slow Growth in Health Care Costs?
• Consider first Medicare + Medicaid
– 6.4% of GDP in 2012 (CMS estimates)
• ACA Medicare changes lower spending
– Projected to be lower by $117 billion in 2022
• ACA Medicaid expansions almost offsets
– Increased by $94 billion in 2022
• M&M account for 7.8% of GDP by 2022
– Compared with 7.9% without ACA
ACA Effects on Private Health Insurance
• Excise tax on high-cost plans begins in 2018
– 40% tax beyond threshold
– Threshold grows at CPI after 2020
– Lowers premium growth and increases wage growth
• Health insurance exchanges
–
–
–
–
Bronze (AV=.6), silver (.7), gold (.8), platinum (.9)
Many insurers offer several plans within area
Enrollees pay full price difference b/w plans
Stimulates insurer competition
But Will Many Insurers Compete?
Significant Within-State Premium Variation
Will Exchanges Realize their Promise?
• Bumpy start for federal and state exchanges
– Enrollment lower than expected
• Similar design to Medicare Part D
– Also bumpy rollout but now largely considered a success
– Increased coverage and lowered RX prices
• Some key issues on horizon
–
–
–
–
Regulating breadth of provider networks
How optimally to risk-adjust?
Smoothing transitions to/from Medicaid and ESI
When to adjust subsidies after promotion, job loss, etc.