Lower out-of-pocket spending after ACA, but much more needed

Out-of-pocket Spending and Premium Contributions After Implementation of the Affordable Care Act

By Anna L. Goldman, MD, MPA; Steffie Woolhandler, MD, MPH; David U. Himmelstein, MD; David H. Bor, MD; Danny McCormick, MD, MPH
JAMA Internal Medicine, January 22, 2018

Key Points

Question: Was implementation of the Affordable Care Act associated with reduced spending on out-of-pocket medical expenses and household premium contributions among nonelderly adults?

Findings: In this nationally representative survey of validated spending data from 83 431 US adults, mean out-of-pocket spending decreased by 11.9% in the first 2 years after the insurance expansions, driven by reductions among persons eligible for the Medicaid expansion and those eligible for cost-sharing and premium subsidies on health insurance exchanges. Premium contributions increased by 12.1%, mainly owing to large increases in the higher-income group, whereas total health spending by households decreased in the Medicaid-eligible (lowest-income) group by 16.0%.

Meaning: Implementation of the Affordable Care Act was associated with reduced out-of-pocket spending for US medical care, particularly among those with lower incomes, but not with reduced premiums.

From the Discussion

In the first 2 years of implementation, the ACA was associated with a decrease in mean out-of-pocket spending for the overall population, driven by decreases among the lowest- and low-income groups and a reduction in high-burden out-of-pocket spending overall and among the lowest-income group. Mean premium payments increased moderately, whereas the prevalence of high-burden combined health spending and income-based inequalities in high-burden spending did not change.

The ACA’s Medicaid expansion, which generally required enrollees to pay neither premiums nor co-payments, likely accounts for our finding that out-of-pocket spending decreased among the lowest-income group after the law’s implementation. This consequence might have been greater if all states had accepted the ACA’s Medicaid expansion. In the analysis of high-burden spending in this group, controlling for use of health care services slightly attenuated the decrease but did not substantially alter our findings. The differences noted for the lowest-income group in our placebo test in the pre-ACA period suggests that our results for this group may also have been influenced by secular trends or early expansions of Medicaid in some states. Because only 17.8% of adults in the lowest-income group paid insurance premiums before the ACA, we are not surprised that the legislation had little effect on premiums in this group.

The reduction in out-of-pocket spending for low-income individuals (139%-250% of FPL) that we observed suggests that the ACA’s exchange plans and cost-sharing subsidies were associated with a decreased burden of health care costs for this population. Our finding from models controlling for use of health care services suggests that decreased use of medical services and drugs did not drive this decrease.

The decrease in mean out-of-pocket expenditures by the middle-income group may reflect the modest 5.1% increase in coverage gained in this group under the ACA. Although individuals in this income group were not eligible for subsidized cost-sharing on the exchange, the ACA’s provision that eliminated cost-sharing for preventive services may have decreased out-of-pocket spending. Although many individuals in this group were eligible for premium assistance through the ACA exchanges, the subsidies were apparently insufficient to prevent growth of premium contributions for this group or to reduce their total health spending.

Previous studies have highlighted the ACA’s successes. About half of the previously uninsured population gained coverage. Several other indicators also improved, such as the likelihood of having access to affordable care and self-reported health status.

The ACA did not have a greater effect on out-of-pocket spending for several reasons. First, only a small proportion of Americans—6.5% according to our data—became newly insured after the ACA. Second, about 28 million Americans remain uninsured. Third, many of those with coverage continued to incur high costs; in 2016, individual deductibles were a mean of $3064 in exchange Silver plans (the metal tier chosen by most exchange enrollees) compared with $1478 in employer-sponsored plans.


Repeal of the ACA was under consideration in Congress several times in the past year, and the future of the ACA remains uncertain. Our findings carry several implications for the health reform debate. First, the ACA was associated with moderate reductions in the cost burden for lowest-, low-, and middle-income households, which represents incremental but important progress. Repealing or otherwise dismantling the legislation without a suitable replacement could cause financial harm to many lower-income families. As of this writing, the Senate tax bill includes a repeal of the individual mandate. If enacted, the numbers of uninsured persons will increase, along with their out-of-pocket costs. Premiums will likely increase because healthier people will exit the insurance pool.

Second, medical expenses currently consume a large share of many families’ incomes and compound income inequalities. Reforms to the ACA that could improve household spending burdens include expanding Medicaid in all states, increasing the generosity of cost-sharing and premium subsidies, and increasing the actuarial values of standard exchange plans. International experience suggests that a universal, comprehensive national health insurance program would most effectively reduce household spending and ameliorate disparities.



By Don McCanne, M.D.

This well documented analysis confirms that "implementation of the Affordable Care Act was associated with reduced out-of-pocket spending for US medical care, particularly among those with lower incomes, but not with reduced premiums."

But ACA still falls far short of the reform that we need. The bottom line, as stated in their conclusion: "International experience suggests that a universal, comprehensive national health insurance program would most effectively reduce household spending and ameliorate disparities." ACA isn't that.

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