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A REAL WHO DONE IT – Differing Perspectives on the Macro and Micro Economic Factors Affecting Healthcare Spending

In depicting and forecasting trends, health economists correlate recent healthcare spending rate declines as intrinsically tied to the national economic downturn. From 1980 to 2008, U.S. healthcare spending grew by 7 percentage points of the GDP (Gross Domestic Product) compared with the approximate 2.6 percentage points experienced by other OECD (Organization for Economic Co-operation and Development with a membership of 34 countries from around the globe). According to recent analysis released by the Center for Medicare and Medicaid Services (CMS) and Health Affairs, for the 5 years between 2009 and 2013 the US spending rate increase has not exceeded 3.8 percentage points. While this macro view of the slowing in the growth of healthcare expenditures is generally accepted, its underlying causes, and even its forecasted, continued decline – is significantly debated.

In their testimony before the Senate Budget Committee on July 30, 2013, 3 expert economists presented their interpretation of the economic indicators driving spending. Joseph Antos (American Enterprise Institute) summed up his testimony in noting, “the biggest single factor driving the recent slowdown is the economy… The failure of the economy to bounce back as quickly as it has after past recessions has prolonged this dampening effect on health spending.” This seems to forecast that as the economy improves, healthcare spending will go up. Len Nichols (Center for Health Policy Research and Ethics, George Mason University) points out however, that while healthcare cost growth is at historical lows, “even as the economy has recovered from the Great Recession of 2010-2011, healthcare growth relative to GDP has held steady.” Kavita Patel (The Engelberg Center for Health Care Reform, The Brookings Institution) summed up the spectrum of macro-economic factors likely responsible for recent health spending declines, “sustained unemployment and lower overall spending during the recession; structural improvements to the healthcare system codified in ACA; and, an increase in out-of-pocket spending due to less generous employer-provided insurance plans.”

In light of these interpretations, we would be hard-pressed not to ask: Just how likely is the implementation of ACA to produce measurable economic changes? An April 2, 2013, U.S. News Blog more specifically asked “Is Obamacare Behind Health Improvements, Job Growth?” Jason Furman (White House’s Council of Economic Advisers) stated that “changes in the economy, both good and bad, cannot be directly correlated to ACA’s implementation.” Furman points to changes in the healthcare system that, while there could be differing views on causal relationships – do demonstrate that ACA’s goals for improved quality and effectiveness of care are being accomplished. To emphasize his point, he highlighted a December 2014 Agency for Healthcare Research and Quality report that noted that between 2010 and 2013 there has been a reduction of 150,000 in hospital readmissions. Certainly, payment and system reforms in Medicare and Medicaid dovetail with ACA’s core strategies for holding insurers and providers more accountable for improved healthcare outcomes and cost-efficiencies. In response to critics who’ve pointed to the perception that ACA has resulted in increased cost-sharing for covered individuals, Furman acknowledged that while “deductibles have increased in recent years, they are increasing at a rate that is no faster than they were before the law (ACA) went into effect.”

Many, especially in California where Obamacare has been reasonably popular with policy makers and the public, point out that the real economic indicators of ACA’s implementation are found at state, local and human levels.

A March 2015 report by the Health Access Foundation: 5 Years into the Affordable Care Act…California Leads the Way highlighted a couple of variables that help to demonstrate both California’s achievements and the real human benefits associated with ACA: transitioned 415,000 (as of September 2014) from Presumptive/Emergency Medicaid and CalFresh (Food Assistance) into Medi-Cal, and in 2013 alone, 358,862 Medicare drug “Donut Hole” seniors saved over $333 million on prescription drugs, an average of $931 per beneficiary; extending coverage to immigrants using State funds (expanded ICHIA under CHIP and the goals for full inclusion of individuals under DACA and PRUCOL). This is, of course, on top of California’s unparalleled achievement of insuring more than 3.4 million Californians between Medi-Cal and Covered California in Year 1 of Open Enrollment and 4.4 million Californians during Year 2 of Open Enrollment. Gallup-Healthways Well-Being Index showed that California’s Uninsured Rate dropped from 21.6 percent to 15.3 in just a one year period between 2013 and 2014. The Commonwealth Fund Survey – Gaining Ground: America’s Health insurance Coverage and Access to Care After the Affordable Care Act’s First Enrollment Periodreported its estimates of California’s uninsured having been reduced by as much as 50 percent by June 2014. Released July 2014 — Where are California’s Uninsured Now? Wave 2 of the Kaiser Family Foundation California Longitudinal Panel Survey reported that nearly 6 out of 10 of its “non-elderly adults, who previous to (Covered California’s) the first enrollment period reported being uninsured,” now reported having health insurance coverage.

What remains to be demonstrated in correlation to ACA’s implementation, are the economic factors (as well as other outcome indicators) that are currently being tracked and analyzed at national, state and local levels. The Peterson-Kaiser Health System Tracker (Peterson Center on Healthcare and the Kaiser Family Foundation) provides a mechanism for assessing key U.S. health system trends and performance indicators. The Tracker provides the opportunity to view the “components of cost growth (within healthcare spending) e.g., price vs utilization” among other economic factors. In correlation to Furman’s point on cost-shifting – The Tracker’s most recent data indicates that between 2002 and 2012 a larger share of household healthcare spending was on insurance premiums and a smaller portion was on Out-of-Pocket costs. It will be interesting to watch trends in these two indicators as ACA continues to determine whether others’ predictions that out-of-pocket costs are actually increasing. The Tracker will additionally compare U.S. data to countries in the OECD. It includes data points such as the projections for workforce and economic gains presented in The Bay Area Council’s 2012 economic analysis. The Council’s modeling forecasted that with California’s full implementation of the ACA in 2010, there would have been more than 98,000 new jobs created and an economic gain of $4.4 billion. Of these gains, the Council’s projections indicated that the Greater Southern California region would have seen a growth of 58,000 jobs and a net economic increase of $3 billion. Bringing this home is the California Healthcare Foundation’s (CHCF) ACA 411: Tracking Healthcare Reform in California. To help assess the ACA’s impact, the CHCF asked the State Health Access Data Assistance Center (SHADAC) to assemble key progress data indicators. ACA 411 provides access to narrative analysis, graphics and data charts. One of the most intriguing representations is that ACA 411 plans to continue tracking and analyzing the burden of healthcare costs on families’ household budgets.



Burden by planOut-of-Pocket Health Care Costs are a financial burden for many California Families. A high burden is commonly defined as when medical insurance premiums plus out-of-pocket spending (copays, deductibles and co-insurance) for health care that exceeds 10% of a family’s total income.

As you see from the previous graphic, as of 2011-2012 nearly half of all individuals who attained coverage  through the individual market spent more than 10% of their income on health expenses.  In comparison only about 16% of those with employer coverage exceeded the 10% threshold, along with fewer than 10% covered by Medicaid. Reducing this burden is one of ACA’s priorities and with many of these individuals receiving more than $5,200 in tax credits — we should see this number decrease in subsequent years.

Other key indicators, like the following graphic depicting the Average Annual Worker Contribution for Employer-Sponsored Family Coverage, are examples of the potential data and graphic representations ACA 411 can generate.

                                    TREND IN WORKER CONTRIBUTION

Increasing contribution

This graphic depicts the trend, both within California and nationally, in the average annual worker contribution for employer-sponsored family coverage. The data show that since 2005, the employee cost for family health insurance has risen significantly. According ACA411 data, as of 2013, California’s average worker contribution of $5252 had significantly exceeded that of the national average of $4,565. What will we see from 2014 and going forward?

Together, this combination of national and state ACA data and analyses provides a viable foundation for the effective evaluation of ACA’s true outcomes. Through economic and progress indicators we are all in a position to analyze data at both macro and micro levels. As researchers and strategists, health business leaders and consumers we will increasingly have many more of the tools needed to answer the question – Did the ACA Do It?

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