The Impact of the Affordable Care Act: Evidence from California’s Hospital Sector

The Affordable Care Act (ACA) authorized the largest expansion of public health insurance in the U.S. since the mid-1960s. We exploit ACA-induced changes in the discontinuity in coverage at age 65 using a regression discontinuity based design to examine effects of the expansion on health insurance coverage, hospital use, and patient health. We then link these changes to effects on hospital finances. We show that a substantial share of the federally-funded Medicaid expansion substituted for existing locally-funded safety net programs. Despite this offset, the expansion produced a substantial increase in hospital revenue and profitability, with larger gains for government hospitals. On the benefits side, we do not detect significant improvements in patient health, although the expansion led to substantially greater hospital and emergency room use, and a reallocation of care from public to private and better-quality hospitals.

That is from a new NBER working paper by Mark Duggan, Atul Gupta, and Emilie Jackson.

Comments

Has a paywall. How they define improvements in patient health will be interesting since other recent papers looked only at death as the endpoint.

Precisely. Without that definition, it is hard to judge such claims. Particularly if the improvement is something not generally measured - better general maternal care, for example, not simply maternal care explicitly designed to reduce infant mortality rates. The second example would show up fairly quickly, the first would likely require decades to measure effectively.

To conservatives, treating diabetes in a "frequent flyer" to an ER which has amputated his feet with expanded Medicaid will cut costs only if his feet are regenerated after his first Medicaid paid doctor visit and his first Medicaid paid 90 day prescriptions are handed to him.

Or, alternatively, ending Medicaid without poor people immediately showing up with diabetes progressed so far as to have cut circulation so much, feet have gangrene, means Medicaid provides no benefit.

Some portion of dementia is caused by high blood pressure over years or decades which causes thousands of microstrokes. Stopping the antihypertensive drugs for a day, month, or even year won't result in this dementia, so the health, and cost benefit, of preventing it won't be seen for probably several decades. Nor will strokes that happen much sooner be immediately seen, but the medical standard of care for stroke is provided under EMTALA to the working poor, thus extending their life until the dementia can be seen. Then the standard of care, nursing homes, is paid for by Medicaid matched by 50-30% local tax dollars.

Alzheimer's is scary because that hits the upper middle class who have had employer paid health care, unlike the old poor people with dementia, people who chose to be born poor and black and in the US, where they get high blood pressure, unlike those born in Africa at the same time.

The human body is so complex its produced so many puzzles. For example, immigrants to the US have basically the generally the health of their peers in their native country, their kids have about half the problems and benefits of the US population, and their grand kids are substantially like the "American race" especially given the near certainty of marriage outside their specific immigrant community. The isolated immigrant orthodox jew or italian catholic or Amish/Mennonite community is rare in the US (but health researchers love getting cooperation from them).

But hey, to a conservative, all computers depend on tubes because government spending on developing smaller radios for space travel is wasted if it doesn't deliver microcomputers in two years, so conservatives stopped wasteful government spending on such fruitless R&D.

"Our primary metric of health is in-hospital mortality, and we focus on the subset of patients discharged with acute, emergent conditions such as Heart attack and Pneumonia to circumvent selection concerns. The point estimates indicate that in-hospital mortality has declined meaningfully post-ACA, however they are imprecisely estimated. A likely channel for improved health is reallocation of patient care to privately-owned and better-quality hospitals. Pre-ACA, 65-year-olds were significantly more likely than 64-year-olds to receive care at privately-owned and better-quality hospitals."

The other dirty secret is getting patients out of the hospital and then not re-admitting them because that would cost money.

The truth is everybody got ER and hospital care prior to the ACA and has gotten such since EMTALA. Expanding Medicaid, in theory, just moves the payments from one bin to another (indigent care to Medicaid).

Making it easier to go to the expensive hospital likely will increase outcomes marginally. It will certainly increase costs.

The bulk of healthcare costs go to hospitals. The bulk of hospital revenue doesn't go to anyone nefarious, it goes to the small army of lower paid staff who run the hospital (the I do think too much goes to top end administrators, but then I am hardly disinterested).

Anything that could make healthcare easily cheaper and better would have already been done. Some monopsonist insurer would have cut a deal with some monopolist hospital system to split the savings. Difficult fixes are also not going to be forthcoming, you have to many vested interests in the status quo. Epic likes having a federal mandate to use a crappy product. Nurses will not be willing to take on patient care and the paperwork required by the government/insurers/etc. And that mountain of paperwork isn't going anywhere as long as you have multiple billing firms.

Oh and finding some cute metric to base reimbursement on? Yeah, that will never work. There is no metric that cannot and will not be hacked. Particularly when the people doing the coding, drawing the labs, and making the diagnoses have a direct financial stake in the metrics.

The only way healthcare gets cheaper is if we do less of something - less actual medicine (e.g. sorry, your cancer is too advanced so we will let you die when we could buy a few years of life), less frills (e.g. single rooms), or less mandates (e.g. translation, HIPAA compliance auditing, Joint Commission compliance).

'Anything that could make healthcare easily cheaper and better would have already been done.'

Like in the rest of the industrial world? But then, America is exceptional - including in how well its doctors are paid, and how wonderfully shielded they are from competition, as Dean Baker consistently points out when talking about 'free' trade agreements.

'And that mountain of paperwork isn't going anywhere as long as you have multiple billing firms.'

Odd how such a system does not really exist in the rest of the industrial world. Regardless of the model used in other countries, that American feature always seems to be lacking.

'Particularly when the people doing the coding, drawing the labs, and making the diagnoses have a direct financial stake in the metrics.'

Yet another feature lacking in those other systems. Seems to be making a pattern, doesn't it?

'The only way healthcare gets cheaper is if we do less of something'

Like less paperwork based on multiple billing platforms and less direct financial interest in gaming the system?

Ugg, yet another apples to oranges comparisons.

The rest of the world does not have American salary rates. Our doctors are no better paid than our lawyers, bankers, programmers, or executives. Likewise the rest of the world doesn't pay for medical training (somewhere around $200,000 per MD currently), nor do they force their MDs to train for as long (e.g. UK docs do the med degree and undergrad combined, as does Germany). Physicians in the rest of the world also work fewer hours, on average.

As far as "shielding from competition", please. One quarter of all physicians in the US are foreign trained. This number is increasing, not decreasing. This is roughly comparable to programmers where there are no license issues.

And at the end of the day, there is the explicit rationing of care where foreign physicians essentially let people die that we can treat in the US. If we had as anemic of medical research in this country it would certainly be cheaper, but then we would expect thousands of people to die sooner. If we didn't spend money on "metoo" biologics, then again healthcare would be cheaper ... it would just take longer (i.e. forever) for the price/QALY to come down.

As far as financial stake in gaming the system? BS. Every bloody election in the UK is fought in part (at least) around the NHS. Every side fudges the numbers (we are in power, things are great; we are out of power, things suck) and as bad as economic linked indicators can be, politically linked ones are worse.

So no, yet another bogus apples-to-oranges comparison does not magically make healthcare cheaper.

Particularly as a lot of social expenditures in the US get stuffed into healthcare because that is where it is politically feasible to bill them.

The AMA is a cartel and our medical system rips off the average American. Trump needs to bust that illegal union and open up healthcare to competition. Make America Great Again!

To a conservative? Really! If some form of socialized health care is all that good why not make it optional. Than all you liberals can jump in and support it. After all if it is "good" why make it mandatory it should sell itself, right? But let's be honest, Socialized health care doesn't ever work. It costs far more, it produces far less health care and it causes more death and illness. But I'll meet you halfway; everypone who wants it can have it, everyone who doesn't will continue doing what they are doing. No tax payer subsidies it will all be funded by those who choose it. Any takers?

Are pu posting from an alternate universe far, far away? In this one "socialized" healthcare works quite well as evidenced by lower healthcare spending and similar or superior results.

Really?

Because in this world the survival curves show that over 100% of the difference in healthcare outcomes are due to the US having higher rates of smoking (i.e. not being bombed in the 40s & poor in the 50s), higher rates of obesity (i.e. most successful agriculture in the world), higher rates of MVCs (i.e. having much higher miles/person/year driven) and higher rates of GSWs (i.e. having effects from higher criminality rates in the US).

Oh and there are also the difference in reporting standards. E.g. 1/3rd of the difference in infant mortality is due to differences in reporting births near the viability limit. Another tranche is due to prenatal termination of unhealthy children in Europe. In fact the neonatal infant mortality rate in the US disappears completely when equivalent reporting is used.

Like many things in life Simpson's Paradox is in full play. Frankly, expecting "healthcare" to contribute more than 25% of "health outcomes" is farcical.

Most importantly, in this universe Europe's better healthcare outcomes predate socialization of medicine. For instance, in 1935 male Canadians had a life expectancy at birth of 61.34; in the US men born the same year had a life expectancy at birth of 59.9. The first socialize medicine plan in Canada debuted in 1947 in Saskatchewan. Did Canada's healthcare system magically improve health outcomes a decade before its creation? And we see this across the board, life expectancy for Americans was a few percentage points lower prior to the creation of national healthcare, it was a few percentage points lower afterward. Give the baseline health demographics in question, if anything we should expect America to fall massively behind.

So no, in this universe "socialized" healthcare prices basically reflect the fact that the rest of the world is poorer than the US. Outcomes reflect differences in reporting and demographics. And even if we bought the indicators as valid indicators the divergence predates the creation of socialized healthcare.

But I am sure you have nice health status corrected data with difference in difference estimates demonstrating your point. I would dearly love to read it, so please let me know your cite.

Not really. It shows that Americans are too ignorant or lazy to do something about the fact that they pay more for healthcare and get worse outcomes. If Trump can't get the prices down, then the next populist the American people elect will try again.

"...reallocation of care from public to private and better-quality hospitals."

Funny how the market produces the best of everything except health insurance. Even in the case of Obamacare, sending the patient to a private hospital is a win.

More ...

"... the expansion led to substantially greater hospital and emergency room use .
I believe we were told that Obamacare would reduce emergency room use, because people with Obamacare would no longer need to show up in the ER with empty pockets to get free (because they never pay the bill) healthcare. I guess that was fib.

More ...

"...the expansion produced a substantial increase in hospital revenue and profitability, with larger gains for government hospitals ..."

I'm shocked, SHOCKED to discover hospitals benefitted from this program.

Who'd a thunk?

"Funny how the market produces the best of everything except health insurance. Even in the case of Obamacare, sending the patient to a private hospital is a win."

The best, like the future, is already here, but it's not evenly distributed.

Agreed. Here again, the problem is a shrinking middle class.

If we are truly rules by technocratic elites, they better get it right.

The question is this:

Has the US voted for it's Cesar Chavez yet?

No, but the noose comes, slow in the drawing, hard and tight in the end.

I suspect you may be confusing two different Chavez's here.

AOC is coming to bring Venezuelan standards of excellence in government for the people to America!

Haha! You're right! I'm in California so I'm confused - we have our own famous Chavez!

I actually meant Hugo, Victor Hugo!

A shrinking middle class and an equally growing upper class?

Also, health insurance companies hugely profited.

Which is hilarious, given Obama's phony tough talk at the insurance companies. "I am the only thing standing between you and the pitchforks!!!"

After which he signed a law requiring health insurance to be very expensive, and requiring every American to buy some.

That sure showed 'em, all right.

We still have our pitchforks.

And my axe!

And my bow!

Bring me my Bow of burning gold; Bring me my Arrows of desire: Bring me my Spear: O clouds unfold!

I will not cease from mental fight,
Nor shall my sword sleep in my hand
Till we have built a single payer plan
In California's green and pleasant land.

And my AR-15!

"An AR-15 is insignificant next to the bow of burning gold."

Not to mention "My Chariot Of Fire"
Although, if you add the chainsaw bayonet...

So that is what America has become: a country with satanic mills and no single payer plan.

Heidegger's term Gewoifenheit: being thrown without explanation into an existence governed by obscure rules. The Unnamable was sustained by its dark comic energy. But by the late 1960s that comic energy, with its power to surprise, had reduced itself to a relentless, arid selflaceration. The Lost Ones (1970) is hell to read and was perhaps hell to write too.

The key Beckettian word 'on', which had earlier had a quality of grinding hopelessness to it ('I can't go on, I'll go on'

Obviously obama and Pelosi are socialists who designed a system which increased payments to private institutions and increased the number of workers they pay, and pay them more!

Capitalists on the other hand, cut the revenue to private institutiions who are then forced to screw over workeds, paying them less or firing them, with government cleaning up and bearing all the costs. Eg, Eddy Lambert the capitalist dealing with Sears which is being bailed out by the unelected Constitutional technocrat who picks winners and losers, the government PBGC, unemployment, welfare, etc.

Expanded Medicaid has replaced the "capitalist" model of working poor being taken to the ER by a private ambulance sent by 911 where the ER deals with a patient in crisis because they didnt get medication for high blood pressure, or diabetes, or other problems because no doctor would see them, nor drug store give them the drugs. Then the ER sends bills for 60 days before selling them to bill collectors, then they went to government and negotiates for a bailout of payment for uncompensated care. The government bailouts were supposed to be ended, but are continuing to some degree since ACA, but mostly the result is hospitals going out of business in rural areas without Medicaid expansion.

When the GOP describes free market health care were government is doing bailouts constantly, and picking which hospitals live and which die based on which ones government bails out, "socialism" looks pretty good.

Wow! You are so right! I'm sold! Let's have the government give everything to everyone for free, and give us all government jobs!

The problem is we have a growing underclass that used to be middle-class that still has it's memory intact.

Add to that the imporatation of huge numbers of illiterate people that think the local emergency room is a "clinic".

You should go to an emergency room here in Central California and see the large numbers of Spanish speakers that take their kids to the ER to treat a cold.

Let's think for a second why those "huge numbers of illiterate people" are in your "Central California."

It wouldn't be because the farmers, packing-shed owners, and other employers of exploitable, low-wage workers want them here, would it?

That is exactly why they are here, but ... only about 5% work in agriculture.

Let's implement eVerify!

Say no to more burdensome regulation from the state. A statist like you is a Stalinist.

When the libertarians get their wish and the central State collapses, I hope I'm around to watch them argue with the stone-faced locals over their "right to travel."

Statists like you can enjoy your genocides and concentration camps while I enjoy my freedoms and liberty shooting my AR-15s and getting fat eating my tasty American BBQ. Y'all can suck it!

"Obviously obama and ...Capitalists on the other hand"

Would presumably capitalize Obama's name.

> Funny how the market produces the best of everything except health insurance.

Not sure if this was sarcasm but obligatory comment pointing out that the operation of independent health insurance companies is too severely restrained to suggest it represents what 'the market' provides.

Simple e.g.:

*it's illegal for insurance to charge a woman a higher premium, even if it's actuarially valid

* it's illegal for an insurance company to not pay for one voluntary annual doctor's visit

* it's illegal for insurance companies to charge their most risky customers more than 3 times that which they charge their least risky customers

and of course, the list goes on. Long story short, it's hard to claim blue cross blue shield is an example of health insurance 'the market' is capable of providing, because it is so strongly constrained by written laws despite the contradictions with mathematical laws and statistical truths. Cue the individual mandate...

Yes, what you said ...

The gubmint screws up everything. For example, fire insurance. The law requires insurance companies that sell fire insurance in CA to offer earthquake insurance. The high deductibles and expensive premiums make those plans unattractive. In addition, since the insurers have to offer you earthquake insurance, many (all?) now require the home to have an "engineered foundation". Most older homes in California, especially those in rural areas or in the mountains where lower income people live, do not have engineered foundations. The result, they have to go to special insurers that charge outrageous prices for very poor coverage, and this hits lower income home owners very hard.

Worse yet, this was a "solution" without a problem. Not one person was killed in a house during the '89 quake - most of the deaths occurred on the Oakland Bay Bridge and the rest on roads and commercial buildings.

It turns out that stick frame construction, even using the OLD PRE-QUAKE CODE, is remarkably durable in an earthquake, due to the redundancy built into the system. Even the less stable post and beam construction can be upgraded cheaply with metal connectors.

The government intervention in the insurance market and the new building codes raised costs significantly for very little extra safety.

"It wasn't a beating," said Sancho, "it's just the rock had lots of sharp points and edges, and each one left its bruise."

"We exploit ACA-induced changes in the discontinuity in coverage at age 65 . . . ." What? My premium went from $1,100 per month with a $6,000 deductible to Medicare premium and very small deductibles and small supplement rates. Discontinuity in coverage, indeed. If you have not yet reached nearly old age, you have no idea. That's not to say I support Medicare for all. Why not? Duh. Discussion of health care in America is a waste of time - unless and until everyone is in the same risk pool, everyone will eventually be screwed. Screw me now, or screw me later.

"the expansion produced a substantial increase in hospital revenue and profitability": natch.

"On the benefits side, we do not detect significant improvements in patient health": but was that ever the point?

From the paper, "Our primary metric of health is in-hospital mortality, and we focus on the subset of patients discharged with acute, emergent conditions such as Heart attack and Pneumonia to circumvent selection concerns. The point estimates indicate that in-hospital mortality has declined meaningfully post-ACA, however they are imprecisely estimated. A likely channel for improved health is reallocation of patient care to privately-owned and better-quality hospitals. Pre-ACA, 65-year-olds were significantly more likely than 64-year-olds to receive care at privately-owned and better-quality hospitals."

How can the authors claim that patient outcomes did not improve yet state patients went to better quality hospitals? How else would one define the quality of the hospital?

Better TV's.

Prettier nurses.

Rather than repeatedly telling us how useless health coverage is for poor people, conservatives should just propose outlawing all those useless gold plated health plans that foolish rich people are wasting their money on. Let's apply a consistent standard to the whole health economy. I'm sure all these same elite high income people passing judgment on the health of the poor will be more than happy to similarly have other people dictate their own consumption preferences!

"outlawing all those useless gold plated health plans that foolish rich people are wasting their money on" The ones subsidizing Medicaid and Medicare patients?

On the whole, it's usually easier to advocate for others minding their own damn business on your own consumption profiles, when you're actually paying for your own consumption....

The case for being left to alone to spend money on marginal, expensive long shot treatments or not is somewhat weakened by requiring someone else's purse to spend.

Would be interesting to see the effect on enrollees finances, as that was a big result of the Oregon study (people didn't get substantially better care, but they were less likely to go bankrupt doing it).

also, "An additional 14 states have, as of this date, not expanded their Medicaid programs. The variation across states in decisions likely partially reflects uncertainty about the effects." are two sentences that I don't think many people believe.

We have a tautology, voters voted to give their money away, they do this continually, take it as the null hypothesis.
Is it better that they give it to George Soros or the hospitals? If you defraud the voter, the Soros will time it exactly and get the bigger chunk. So we let the voter defraud herself, and we get at least a random draw.

Winners will enjoy a fiscal tailwind, then, from Florida's expansion on the 2020 ballot, available for print in pdf format at https://drive.google.com/file/d/11zDJyFVSgvYNzImYEjsHotisQh9ioUH9/view?usp=sharing

I thought Florida was contracting due to sea level rise.

The answer, for those interested, we do not have a clue.

This is povabley true, the volatility will be at least as large as experienced with NCHLB, and that program was no where near stable at this time in the path. The adjustment process alone makes all this a huge uncertain mess, and all we do is engage in fantasy. The fantasies are not likely to be sorted out before the next major downturn, so why not grin and bear it until then, it shouldn't be long. Everything becomes a lot clearer when we have driven ourselves back to poverty.

Use coherence in California. California is a coherent whole representing 20% of your stats, use that alone and a lot of uncertainty melts away.

What else about California? After 12 years of NCLB we have a teachers strike because LA county is basically broke, but LA amounts to about 70% of the 20% of the total! Before you even start a project like this, you need to isolate volatility, you cannot, impossible. A lot of these studies break down in the aggregate for the same reason, no isolation of the big, small and medium states. Both NCLB and Obamacarte are state centered, the state axis of symmetry beaks out your variance, you need to align states, compare across comparables, and recombine weighted by variance. But the method speaks to results, none of the state politicians are even close to understanding the variance issue, and all are likely fouling this up. It makes no matter if you re funding the state agencies for potatoes or medicine, it is the state agency concept that fouls all these programs. We have known this mathematically since before Obamacare, we easily predicted a very long and costly stabilization period, having nothing to do with medicine. Your distribution graph has a serious skew and an increasingly serious inability to find prime factors to break up distribution without jamming the system. The rule is, keep the state out, do something the federales can do all by themselves to help out, like just have the federales run emergency services completely, with their own personal.

Good work NBER. We've gone from papers so counter-intuitive they need to assume other oddball papers to get where they want to go, to a paper which describes a feature of our health care system as worthwhile and cutting-edge economic analysis. I feel healthier just knowing such research is out there.

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