Healthcare spending could drop $ 11.4B next year if ACA premium subsidies expire, research finds

Dive Brief:

  • Healthcare spending could drop by more than $ 11.4 billion next year if enhanced premium tax credits enacted in the American Rescue Plan expire, new research finds.
  • Hospital spending would decline by $ 3.8 billion, while spending on physician practice services would drop by $ 1.3 billion, according to a report from the Robert Wood Johnson Foundation and the Urban Institute published Wednesday. Prescription drug spending would decline by $ 3.4 billion and spending on other services outside of hospital and doctors’ offices would fall by $ 2.8 billion.
  • Plummeting health services spending would happen due to lost credits potentially leaving more than 3 million people currently on Affordable Care Act plans without insurance, and therefore less likely to spend on care, researchers said.

Dive Insight:

The $ 1.9 trillion ARP legislation passed in March 2021 increased subsidies for coverage in the ACA marketplaces and expanded the number of people they’re available to. The more generous financial aid increased coverage affordability and enrollment, which reached a record high for 2022.

Those enhancements will expire in 2023 unless Congress extends them. The subsequent price hikes would hit about 13 million people across the US and could lead to millions losing coverage, according to estimates.

The new research from the Urban Institute and the RWJF puts a price tag on the loss of provider revenue stemming from that drop in coverage.

Using an Urban Institute simulation model, researchers estimated healthcare services spending for the non-elderly, including uncompensated care provided to uninsured patients with and without the enhanced financial aid. The model excludes health insurance premium loads or administrative cost, as that spending does not go to providers.

The research found that total spending on health services would reach almost $ 2,097 trillion next year if the enhanced ARP premium tax credits are extended and drop to roughly $ 2,086 trillion without them.

“The reason why we’re seeing this large decline in health spending is because uninsured people use less medical care,” Urban Institute senior fellow Matthew Buettgens said in a statement on the report.

Florida, Georgia, North Carolina, South Carolina and Texas – states that would see the greatest coverage losses if the subsidies expire – would have the biggest drop in spending, ranging from 1.3% to 1.9%.

California, Massachusetts, New York and Vermont would see virtually no change in spending, as they have state programs providing enhanced premium tax credits or cost sharing reductions before the ARP was passed that will remain in place.

The political fallout from failing to renew the subsidies would likely be severe, as news of spiking insurance premiums would hit voters right before the midterms.

President Joe Biden has pushed Congress to make the subsidies permanent. Though the effort has stalled in Congress, vulnerable Democrats in swing states are now pushing for leadership to fast-track legislation extending the subsidies, according to Politico.

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