Prior to full implementation of the Affordable Care Act (ACA) in 2014, states had taken the leading role in regulating individual health insurance markets. The ACA’s regime of subsidies, penalties, and federal regulations made individual coverage more accessible to those with moderate incomes and those with preexisting medical conditions. Premiums for such coverage, however, doubled between 2013 and 2017, leading to turmoil in individual markets. Both Congress and the Centers for Medicare and Medicaid Services (CMS) sought to grant states more authority to stabilize their markets through a waiver process established by section 1332 of the ACA. These efforts fell short. Congress did not enact significant changes to the ACA, and few states obtained CMS approval for section 1332 waivers to stabilize their markets. This paper offers several recommendations for streamlining and improving that waiver process that would provide states with more tools to stabilize individual markets.
Expanding insurance coverage could, by insulating patients from having to pay full cost, encourage the utilization of arguably unnecessary medical services. It could also eliminate (or at least diminish) the need for emergency services through increasing access to preventive care. Using publicly available data from New York City for the period 2013-2016, we explore the effect of the Affordable Care Act (ACA) on the volume and composition of ambulance dispatches. Consistent with the argument that expanding insurance coverage encourages the utilization of unnecessary medical services, we find that, as compared to dispatches for more severe injuries, dispatches for minor injuries rose sharply after the implementation of the ACA. By contrast, dispatches for pre-labor pregnancy complications decreased as compared to dispatches for women in labor.
Resetting the Scoreboard: Why CBO Should Abandon Its Flawed Analysis of the Center for Medicare and Medicaid InnovationFebruary 15, 2018
Congress created the Center for Medicare and Medicaid Innovation (CMMI) in the Affordable Care Act and vested it with extraordinary powers. CMMI can conduct demonstration projects in the Medicare, Medicaid and Children’s Health Insurance Program and expand those projects nationwide without congressional approval.
The Congressional Budget Office (CBO) believes that CMMI will achieve substantial federal savings. It bases this conclusion not on analyses of projects that CMMI has undertaken, but on faith in the CMMI process. CBO assumes that process will produce money-saving ideas and that the center will scrap failed projects and expand
“The savings that CBO expects to result from the center’s activities,” a senior CBO official said in congressional testimony, “stem largely from the judgment that successful demonstrations will be expanded and achieve savings.”
The statement’s circularity – CBO “expects” CMMI to achieve savings because CMMI will “achieve savings” – is but one way which the agency’s analysis of CMMI departs from its long-established methods of preparing estimates. In addition to assuming that CMMI will sometime in the future conceive, launch and nationalize successful projects, CBO conjured a numerical factor to convert its assumptions into dollar estimates. It then embedded these numbers in its Medicare baseline, the yardstick against which it measures legislation.
CBO’s unique approach to CMMI thus colors its analysis of legislation designed to achieve Medicare savings. CBO believes that any bill that would overlap with any ongoing or possible future CMMI demonstration would increase Medicare spending above baseline levels. Even if Congress offers up a proposal that would reduce spending relative to the statute, CBO will score it as a spending hike if it believes that CMMI might someday test a similar policy.
CBO thus ascribes unobserved and unobservable savings to projects that CMMI has not yet undertaken (and may never undertake), quantifies these savings through the application of an arbitrary numerical factor, incorporates the savings into its Medicare baseline, and measures the budgetary effects of legislation against this revised baseline.
This paper traces the history of Medicare demonstration projects and shows how CMMI’s authorities differ from its predecessors. It then examines CBO’s assumptions about CMMI, carefully tracing the reasoning that has led to its conclusions. It then shows how recent events, including the Trump Administration’s cancellation of CMMI projects that CBO believed would save money, expose flaws in CBO’s assumptions and reasoning. It concludes with recommendations for CBO, Congress and the executive branch with respect to CMMI.
How do the Affordable Care Act health insurance coverage expansions affect payment for medical care provided through liability insurance, such as auto insurance? Theoretically, expanding coverage might lead to a substitution of health insurance disbursements for automobile insurance disbursements. Alternatively, expanding health insurance coverage might increase utilization of medical care, increasing auto liability claims payments. The net effect of these two mechanisms can only be determined empirically. We evaluate the health insurance-auto insurance interaction by examining the 2010 ACA dependent coverage expansion. Prior to 2010, individuals 19 and older were excluded from health insurance coverage under their parental health insurance plan. In September 2010, as part of the ACA, individuals were allowed to continue health insurance coverage until age 26. We use this policy change and claims data from insurers representing approximately 60% of the automobile passenger market to evaluate the effects of expanding health insurance coverage on auto liability claim payments. Using a difference-in-difference research design, we find an approximate 10% reduction in the total BI claim count in the policy-affected 19-25 ages when compared to the control group of individuals 26-34. Conditional on filing a claim, we also find an approximate 9% reduction in the mean total auto insurance paid amount in the 19-25 ages compared to the 26-34 ages. We do not identify any effects of the policy on the PIP auto insurance line.
We investigate the effect of the Risk Corridors (RC) program on premiums and insurer participation in the Affordable Care Act (ACA)’s Health Insurance Marketplaces. The RC program, which was defunded ahead of coverage year 2016, and ended in 2017, is a risk sharing mechanism: it makes payments to insurers whose costs are high relative to their revenue, and collects payments from insurers whose costs are relatively low. We show theoretically that the RC program creates strong incentives to lower premiums for some insurers. Empirically, we find that insurers who claimed RC payments in 2015, before defunding, had greater premium increases in 2017, after the program ended. Insurance markets in which more insurers made RC claims experienced larger premium increases after the program ended, reflecting equilibrium effects. We do not find any evidence that insurers with larger RC claims in 2015 were less likely to participate in the ACA Marketplaces in 2016 and 2017. Overall we find that the end of the RC program significantly contributed to premium growth.
Spillovers can arise in markets with multiple purchasers relying on shared producers. If producers are constrained in their ability to adjust quality and cost across purchasers, then the influence of a dominant purchaser affects the entire market. Prior studies have found such spillovers in health care, from managed care to non-managed care populations — reducing spending, utilization, and improving outcomes. Similar effects have been identified in the Medicare Advantage market as well, with studies finding declines in utilization and reductions in resource use among the Traditional Medicare population associated with increases in county-level Medicare Advantage penetration. However, no study to date has provided plausibly causal estimates of such spillovers in the post-Affordable Care Act era. Our study does so by exploiting idiosyncratic differences in payments to Medicare Advantage plans that are unrelated to traditional Medicare spending. Further controlling for health status and other potential confounders, we estimate that a one percentage point increase in county-level Medicare Advantage penetration results in a $146 (1.7%) reduction in standardized per enrollee Traditional Medicare spending. We find evidence for reductions in utilization both on the intensive and extensive margins (including reductions in the number of inpatient stays) and across many types of health care services, not all of which have been analyzed in prior Medicare Advantage spillover studies. Our results suggest that spillovers from Medicare Advantage to Traditional Medicare have persisted in the post-Affordable Care Act era.
Given the $3 trillion spent on health care in 2015 and the political contention surrounding insurance expansions, the impact of health insurance on health behaviors, medical utilization, and health outcomes continues to be of the upmost importance. How insurance influences investment in good health and risky behavior (ex ante moral hazard) has received much less attention than the effect of insurance on the out-of-pocket cost of care (ex post moral hazard). Since many risky health behaviors take decades to result in illness, these behaviors likely respond to expectations about future insurance but could be unaffected by current insurance status. I examine the effect of moral hazard in the context of risky sex, a health behavior that results in quick and economically meaningful consequences – fertility and sexually transmitted infections. I isolate the effect of ex ante moral hazard by exploiting a policy in the Affordable Care Act, the 2012 zero cost-sharing for prescription contraception mandate. Leveraging pre-policy insured rates as a measure of policy intensity, I use dose-response event studies that estimate both a time-varying treatment effect as well as a one-time jump in outcomes in the treatment year. I find evidence ex ante moral hazard from health insurance decreases prevention and increases STIs. I then exploit the 2010 dependent coverage mandate to determine the overall effect of health insurance. Based on this policy I find that the protective effect of insurance on STIs more than compensates for the reduction in prevention.