Physicians

Will ACA Implementation Lead to a Spike in Demand for Care?

As the Affordable Care Act’s (ACA) exchanges open and Medicaid expansion takes effect, millions of uninsured Americans will gain new coverage. This raises a key question: how are we possibly going to meet the demands of all of these new individuals entering the system? The physician workforce is growing slowly, at best, at a time when an aging population is increasing demand for care.

Predictions include long lines for everyone, rising prices and premiums as physicians are able to command greater market power, and reduced quality of care. Some have recommended additional government funding to help train more medical residents as a response.

But while studies predict ACA implementation will prompt an increase in demand for medical services, there is evidence that the increase in demand will not be as great as the raw number of newly insured Americans might suggest.

The latest CBO forecast projects the reduction in the number of uninsured Americans under the ACA will be 11 million people next year and 24 million by 2016. That’s an increase in the percentage of Americans with insurance of roughly 5% in 2014 and 12% in 2016. If the uninsured used zero health care today, but upon becoming insured used the same amount as a typical insured person, then the increase in demand for care would be the same as the increase in coverage.

In reality, the uninsured use substantial amounts of health care – but only about half the care that the insured use today. One reason is because they are uninsured – paying full prices for care rather than a small copay discourages use. Another reason also explains why many (but not all) are uninsured in the first place: they are healthy and don’t anticipate needing or wanting medical care.

When the uninsured gain coverage, demand does increase, but not dramatically, studies show. Evidence from the Oregon Health Insurance experiment, in which a funding cap forced the state to grant Medicaid coverage to some applicants but not others using a lottery-type system, found that those who did gain coverage increased their use of both hospital and physician care by about one-third relative to controls.

These findings are consistent with simulations based on the RAND Health Insurance experiment in which participants were randomly assigned to health insurance plans ranging from essentially free care to catastrophic coverage only. Other evidence reviewed by the CBO in 2008 suggested similar conclusions. Combining these three sets of evidence yields small demand increases – less than 1% (0.6%) in 2014 and 1.4% in 2016.

Increases would certainly vary regionally and could stress health care systems in areas with large proportions of uninsured and low provider supply. But in most areas, given the typical fluctuations in a given health care provider’s mix of patients, changes of this magnitude (or even demand increases double this size) would barely register. And even those small demand increases may be blunted by the fact that most newly insured people will enter either Medicaid managed care plans or low-cost exchange plans that use managed care techniques and limited provider networks to control utilization.

Lessons from Massachusetts, which implemented a similar reform in 2006, support this assessment. One might have expected an even stronger response there, with overwhelming popular support and considerable state outreach efforts. But neither utilization of hospital care, nor waiting times for physicians show evidence of change due to the reform, despite an increase in coverage among the nonelderly of roughly 6.5%.

While ACA implementation may well have impacts on the health care workforce, increased demand is not the only culprit. For example, the creation of accountable care organizations or penalties for re-hospitalizations may already be leading to changes in the way health care providers operate.

The growing number of Americans newly-insured under the ACA will undoubtedly lead to a surge in demand for care, whether through Medicaid or insurance exchanges. But, if predictions hold, the increase won’t be as dramatic as some may fear.

David Auerbach is a policy researcher at the nonprofit, nonpartisan RAND.

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21 replies »

  1. “is the attempt to provide something close to what a large-firm employee has access to (heavily subsidized insurance at the margin), but outside of the large firm.”

    Not even close David unless there is a subsidy. You should also compare what employees pay for in their tax free coverage and what an ACA individual will pay.

    Many people will fall outside the subsidy income cap but still will find it a hardship to pay for coverage – with no tax write off. As well the off-the-cliff subsidy levels will put many in a position of having to forego a raise to avoid having that extra money being more than eaten up in higher health care.

    We still don’t have anything close to health parity in this country.

  2. Thanks for reading, and for the nice discussion, folks. Many of you make excellent points. To Bob Hertz, yes, high risk pools have very high average costs per enrollee. But those are pools made up almost entirely of people with chronic illnesses and diseases, by definition. These would be a minority in the Exchanges, and balanced by premium-paying, relatively healthy folks who would even out average premiums.

    I agree it’s too bad the public option wasn’t allowed to go through – at the very least, it would have been a pretty interesting experiment in seeing how people might have traded off cost (the government plan would probably have been significantly cheaper because of lower provider payment rates and lower administrative costs) versus other preferences in choosing plans.

    It’s true health insurance serves both a classic ‘insurance’ function but also a general maintenance function. And people with chronic illnesses are certainly more interested in the latter. One can argue that there’s a public interest in reducing the additional financial burden associated with chronic illness because it’s generally not the sufferer’s fault (whereas, one can ‘buy down’ their own deductible in auto or homeowner’s insurance, but we generally don’t feel that individuals deserve a subsidy for doing so).

    Finally, one ‘point’ of the ACA that may be under-appreciated (and I am not speaking here as an advocate) is the attempt to provide something close to what a large-firm employee has access to (heavily subsidized insurance at the margin), but outside of the large firm. I.e., to make insurance coverage job-neutral and thus improve labor market matching. The Urban Institute has projected that the ACA will foster more than a million new entrepreneurs – people who stay employed at a large firm because they would lose their health insurance (perhaps they have a pre-existing condition and couldn’t even get coverage in the individual market) if they went out on their own.

  3. I believe that all the existing high risk pools in the states which have them are being dissolved. Those insureds will be moving to the ACA.

    The subsidies will help those persons with chronic illnesses. One reason that many of the high risk pools in the past were so scrawny was the lack of subsidies. People with chronic illnesses usually have lower incomes.

    You can call this a spike in demand, or just transferring existing demand to the federal pools. Either way it will be expensive. The average cost of a high risk insured in MN was over $12,000 a year. The average cost for the 200,000 or so persons who joined the 2010 Federal pool was $31,000 a year. There are a lot of postponed surgeries in this group.

  4. “how you’ll garner political support for it.”

    How do we garner political support for anything in the present political mess. Don’t look at the how, look at the who. Corporate lobbyists with campaign cash and jobs for politicians family have frozen the “system”.

  5. The adult actuarial risk envelope is 60-70 years, not one. “Young health people” who “don’t need healthcare” today need to be made to understand this. This is one of the huge failures of the PPACA sales job.

  6. Well, I use my real name, with a link to one of my websites. Always have. I too don’t suffer trolls gladly.

    Dial back the hype, OK? I. for one, am not an “ObamaCare Hater,” though I am critical of a number of its elements — as anyone who has studied its not-2,700-pages in detail should be. It’s really essentially “AHIPcare,” given how it was shaped (I followed every draft of the original bill HR 3590).

    I guess it is the best deal he could have gotten, though it would have been nice had he had the balls to actually spend some political capital and show some Presidential leadership while it was in the oven instead of letting Congress — ahem, AHIP — write it.

    A pretty byzantine, convoluted, inscrutably complex way to legislate something he’s now going around cheerily calling a “right.”

  7. Ok, Peter1. I have no problem with the idea of single payer. See for example my blog post from 2009: http://healthbusinessblog.com/2009/08/07/a-pretty-good-argument-for-single-payer/

    Having said that, it will take another generation before there’s a realistic chance of single payer happening in the US. I personally would have liked to see the public option make it into the ACA. That way private health plans would have had the chance to demonstrate whether they actually add value. If the answer had been no, that would have started us down the single payer path.

    So I come back to the last part of my previous comment: “how you’ll garner political support for it.” And that, my friend, is where you’re stuck.

  8. “let’s hear what alternative you’re proposing, how it will be paid for”

    Single-pay, taxes – like every other modern industrialized country. That’s the only way to get the prices under control. The prices are the problem.

    I would argue the poorer you are the less you can afford high deductibles. People with resources choose high deductibles and can afford the necessary savings to build up a war chest.

  9. Peter1 For most people there is a difference between $5000 and $35,000. Five thousand is an amount a typical working class person could potentially borrow from relatives, friends and credit cards and pay off over 2 or 3 years, whereas $35,000 might lead to bankruptcy.

    Someone who could never pay back $5000 should be eligible for Medicaid under the ACA.

    I’m not arguing the bronze plan is a good deal for everyone, but again let’s hear what alternative you’re proposing, how it will be paid for, and how you’ll garner political support for it.

  10. “People now understand health insurance as something that will pay for everything, maintenance and catastrophic.”

    Tell that to those with chronic conditions.

    Going broke can mean a catastrophe that robs you of the ability to work and pay your premiums, co-pays and deductibles so that your insurance won’t be cancelled.

    Do you MD in a hospital that provides insurance? Get group coverage through your association? Many uninsured don’t have those options. As well, employer coverage may extend to family members but at an very high rate.

    Your car can be replaced, you can rent not own, but to compare health insurance to those is missing the point entirely.

  11. I mean insurance in general. Like homeowners insurance or car insurance. You don’t use those for general maintenance, but so you don’t go broke when something really bad happens. People now understand health insurance as something that will pay for everything, maintenance and catastrophic.

  12. “As insurance was originally conceived.”

    Shirie, the ACA was mostly created to address the uninsured, by reason of affordability either by pre-exist or just plain premium costs compared to income. What “conceived” would that include?

    How far back to “originally” do you want to go to cover people?

  13. I think Mr. Auerbach is right. Some projections suggest that young healthy people will be a hard sell to sign up for coverage, partly because they don’t currently need health care and partly because the co-pays and deductibles are substantial. I doubt there’s a million healthy folks out there who will suddenly run to their nearest doctor with pent-up need for “healthcare”. The reason to get more people insured is, or should be, to protect them and us from catastrophic healthcare needs and the attendant costs. As insurance was originally conceived.

  14. David, what’s the difference in not being able to afford a $5000 deductible (not the mention co-pays) and not being able to afford a $35,000 bill?

    Would it be the amount of wage garnishment and asset seizure of the collection agency?

  15. Remember we’re moving to confront problems that have been showing up uninvited in emergency rooms and clinics for years. Instead of waiting for them to come to us, we’re moving to them.

    Over the short term this will look bad.

    In areas where there are large uninsured and large undocumented populations — in California we’re talking about Los Angeles, San Diego and the Bay Area — we’re going to finally be getting answers to questions we’ve been asking for years

    We’re going to find a lot of early stage cancers. Unfortunately, we’re also going to find some late stage cancers. We’re going to find a lot of undiagnosed cases of HIV/AIDS. We’re going to find out that a lot more people have high blood pressure than we’d previously counted. Many cases of diabetes. Lots of potential heart attacks.

    Yes. It’s true. This is going to mean that we’re going to have spend some money.

    But over the long term, we’re going to be saving money.

    Does this new reality mean we’re failing?

    That government is somehow causing the problem by stepping in?

    I don’t think so. I think it means we’re finally confronting a system that WAS FAILING.

    And about damn time.

  16. Interesting how the ObamaCare haters are foaming at the mouth about high out-of-pocket costs for the Bronze plans. What alternative, exactly is being proposed? Selling insurance across state lines? Tax credits? Or do they just want to go back to the wonderful days of yore? And why don’t you use your real names? I’m waiting to hear…

    Meanwhile, I do think this article is a bit too optimistic about the ability of the system to soak up extra demand in the near term. Here in Massachusetts things did get busier after RomneyCare came in, even though we already had a low rate of uninsured people and backup systems like the uncompensated care pool.

    But since as a country we spend far more per capita than anyone else, over time I expect we’ll find a way to get more out of the level of delivery system capacity already in place. If that capacity is strained by more people coming into the system over the next couple years, so be it. That will just act as an impetus to get moving on efficiency.

  17. Not after they see the massive deductible and copays.
    These people were not expecting 5000.00 deductibles for a bronze plan.

  18. Anytime I see data, I always ask whether it passes the ‘sniff test’ (sorry, old medical term). In other words, does the data seem fairly in line with what I know anecdotally. In this case, I actually think the data being presented makes sense. A 30% increase in utilization by newly insured as compared with baseline control..I buy that.

    On the other hand, remember that healthcare is one of only industries that work opposite of traditional demand/supply curves. The more you put out there, the more demand there is. This is typically used to refer to medical care. So – the example goes (and is supported by data) – the more cardiologists are in the local area, the more cardiology usage is seen. This is due to in part to an increase in referrals and availability, but also and most importantly, due to an increase in the desire of the patients to have more quantity and specialization of care when it is available.

    If we use that argument, then human nature says that the more people are able to access care, the more they will. I’m a big fan of data and modelling, but always conscious of the fact that – just like financial models vs reality have shown us – markets are not perfect and people are not always rational.

  19. Any ostensible UTIL spike will also be blunted by “benefits shock” when people see the massive out-of-pocket deductibles and co-pays in their cheapo AHIPcare “bronze” plans that will be so “affordable” — per Obama’s red herring / bait & switch “cheaper than your cell phone bill.”

  20. ” And even those small demand increases may be blunted by the fact that most newly insured people will enter either Medicaid managed care plans or low-cost exchange plans that use managed care techniques and limited provider networks to control utilization.”

    Assuming Medicaid is miraculously expanded in a state like, say, Texas. Any semblance of a back-up plan?

    Maybe that pesky buzzword “telemedicine” will be proven useful after all…

    What was done in Mass to support CAH hospitals post-reform?

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