Was It Worth It?

There is a whole lot of soul searching in Democratic circles these days. Given the shellacking at the polls, it’s only natural to ask: Was the health reform bill worth it? 

What did the Affordable Care Act (ACA) achieve that is worth $1 trillion of taxpayer money and benefit cuts for the elderly and the disabled, to say nothing of the Democratic losses on election day? Other than some insurance reforms that have been overhyped, members of Congress who voted for the ACA don’t seem to have a coherent answer. What about Kathleen Sebelius? No luck there. How about Rahm Emmanuel or David Axelrod?  They don’t seem to know either.

So I turned to the blog sites of some academic health economists. If anybody can tell me why the ACA was worth it, surely they can.

Austin Frakt was reliably up to the task. The health care bill will insure the otherwise uninsured, he says, and with insurance they will acquire more health care and live healthier, longer lives. He writes:

The most important benefit of health reform: It was, is, good for health. The principal way in which health reform is good for health is that it provides access to insurance for tens of millions of Americans…. let’s just take insuring the uninsured. Many, many, many, many, many, many studies using the best statistical techniques find that insurance is good for health. Aaron and I have written about them numerous times, so I won’t do a literature review in this post. (Follow the “many” links provided above.)

In my opinion, Austin is cherry picking his evidence — especially when it comes to enrolling the uninsured in Medicaid, which is where half of them are headed. Several of those links are to junk studies; he ignores studies with contrary findings; and he conceals what I think is really interesting (given that we’re about to plop down a cool trillion) — health economists don’t actually agree on what difference health insurance makes.

I want to put the academic studies aside and analyze this issue using ordinary common sense. There are four observations:

  1. No matter how much additional insurance we create, patients as a group will not be able to obtain additional health care unless (a) there are currently idle resources that can be brought online, (b) additional doctors, nurses, etc. are trained, or (c) we relax restrictions on the ability of pharmacists, nurses and paramedical personnel to do some of the things doctors are now doing.
  2. Regardless of conditions of supply, the newly insured will not get more health care unless they obtain access to providers they did not have access to before (e.g., being able to see doctors who previously would not see them or being able to outbid other patients in the competition for provider time and resources).
  3. Even if the newly insured do get more care, is subsidizing insurance premiums the best (most economical) way to create more access (as opposed to, say, creating more community health centers)?
  4. If better health is the ultimate goal, is spending money on health care the best way to achieve it (as opposed to, say, spending money on education, job training, spending money on education, job training, etc.)?

As we have noted before at this blog, the primary care sector is characterized by growing shortages, not surpluses, and the pattern seems to be widespread. The last time you were at a family doctor’s office or a hospital emergency room, did you notice any idle resources? Were there a lot of doctors and nurses standing around with nothing to do? Also, although earlier versions of the ACA did have line item expenditures to train additional providers, all these expenditures were zeroed out before final passage.

Massachusetts cut its uninsured rate in half but did nothing to increase supply. As a result, the wait to see a new physician in Boston is twice as long as in any other U.S. city and traffic to Massachusetts emergency rooms is higher than ever. About half of the newly insured in Massachusetts enrolled in Medicaid and most of the remainder enrolled in plans paying not much more than Medicaid rates. This means that the newly insured are likely to be at the rear of the waiting lines.

Don’t expect the results to be better if we repeat the Massachusetts experiment nationwide.

What is gained by enrolling people in an insurance plan that basically allows them to get care only at the same places they were getting care before they were insured? Not much. At least not much in terms of better health. It seems almost self-evident that if you want uninsured, low-income families to have a wider choice of doctors and facilities, enrolling them in Medicaid is a poor use of money.

Finally, it’s not clear that we get the biggest health outcome bang for the buck by spending money on health care. A principle that applies universally is: wealthier is healthier. Another principle: being better educated is healthier. Marginal dollars spent to improve education and job skills may produce more long-term health benefits than spending more money on medical care.

I’ll return in a subsequent Health Alert to the question of what the evidence shows about whether being enrolled in Medicaid is better than being uninsured.

Comments (24)

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  1. Joe S. says:

    What you are saying is that the people who passed the bill had no idea what they were voting for or what difference it would make. You’re right.

  2. Karen Y. says:

    My fear is that Congress and the White House, through redistribution of wealth, will make sure that those at the lower end of the financial spectrum will have more dollars; of course, the assumption is they will be spent on health care. ACA is just the first step in “controlling the people.” (Those aren’t my words — Rep. Dingle said them in an interview on a radio program in Detroit. Slip of the tongue? I think not!)

  3. Uwe Reinhardt says:

    When we teach health economics, we use vobn Neumann-Morgenstern utility to show that acquiring health insurance is welfare enhancing.

    No that John tells us that health insurance does not do anything for health status, I wonder if I should ditch that lecture. How could healht insurance be welfare enhancing unless it improved health status. Good exam question.

    Also, I assume NACP employees do not have health insurance, because it does not do anything for them.

  4. Devon Herrick says:

    Levy and Meltzer (2001) found that some subgroups experienced better heath due to insurance (e.g. babies of at-risk mothers on Medicaid). However, in other groups it wasn’t clear that health insurance led to better health status as opposed to other variables like education, wealth, lifestyle, etc.

  5. Don McCanne says:

    Certainly our primary care infrastructure needs reinforcement. Some measures in the Patient Protection and Affordable Care Act are a step in this direction. Also the announcement by HHS of upward revisions of primary care payment rates in Medicare are another positive step.

    Instead of addressing supply deficiencies, we could follow a policy pathway that shortens the primary care queue by denying access to care for those lacking insurance and lacking adequate funds to pay for their care. That would work, especially in a nation that doesn’t seem to be very big on social solidarity. That would inflict physical harm on only those who can’t afford care, and mental anguish on those of us who suffer from witnessing health care injustice (including me).

    Also there seems to be a bit of irony in labeling as a cherry picker a policy analyst who is trying to harvest all crops across the board, especially when it is coming from one of the most prominent cherry pickers of them all. (Comment merely observational, as absolutely no disrespect is intended.)

  6. Al says:

    This utility response N-M in the reply above (whatever it might be) dependent upon only two choices assumes benefits existing only in the mind of those that like to nudge and overly involve themselves in the personal lives of others. If the claim were true then we should double or triple the amount we presently pay or place the sum total of our paychecks into insurance leaving none of it for anything else. We could be 100% insured while dying from starvation never having the ability to enjoy the fruits of our labors.

    There are Nudnick’s (Y) and now we have Nudge-nicks.

  7. Doctor DAVE says:

    As a physician and surgeon in Orthopaedic Surgery, I have not been accepting either Medicade or Medicare patients since the government has taken over healthcare and dictated what my services are worth. I disagree with the politicians who seem to enjoy kicking around the medical profession by hanging a carrot in front of doctors by “reimbursement” policy.
    What politicians do not compute is the freedom we have in America to not participate in programs. I predict that more than half of the medical profession will not participate in either program, just as the Mayo Clinic has determined is not worth the revenue loss. Maybe our government can operate in a defecit, but some of us have to pay bills with real money.

  8. John Seater says:

    Improving health is *not*, or at least should not be, the objective of government policy. The objective is to increase social welfare. Government-mandated health insurance may improve health and still reduce welfare. This is a standard issue in 1st-year graduate welfare economics. We can’t simply look at the benefits of a government program and declare the program “good.” We have to weigh the benefits against the cost. In the absence of a market failure, the costs are guaranteed to outweigh the costs. Government intervention then is welfare-reducing even if it happens to be health-enhancing. So I don’t care if Mr. Frakt can cite studies showing that more health insurance means better health. I only care about studies that show that social welfare in increased by government intervention in the market. Absent those, I oppose any such intervention.

    By the way, I still am waiting for someone to tell me of a significant market failure in the health industry that is addressed by Obamacare, or even any significant market failure at all. I am not a health economist, so maybe there are some I don’t know about. I am open to argument. So far, though, I have heard no such argument, only presumptions that significant market failures exist.

  9. John Goodman says:

    Uwe Reinhardt is certainly right that insurance could be welfare enhancing even if health status doesn’t improve, provided it reduced the risk of out-of-pocket payment or the variance in the probablility of getting various quantities of actual care. But insurance can only reduce risk if it changes something — out-of-pocket costs or quantities of care.

    Uwe, I assume that your N-M utility function goes through the origin. If so this is where you need to focus if the insurance has no impact either on money or care. Here is a classroom exercise: How much does social welfare go up when you multiply 32 million(people) times zero utiles for each?

  10. Vicki says:

    How could being in Medicaid be “welfare enhancing” if nothing changes — no increased access to care and no change in what the patient actually pays for care (which is zero).

  11. When the Senators were negotiating the Florida Flim-Flab, Nebraska Cornhusker Kickback, etc., I remember speaking at Tea-Party rallies where they were waving signs stating “Obamacare Does Not Satisfy the von Neumann-Morgenstern Utility Theorem!”

    The burden of taxation used to finance Medicaid might well be such a drag on prosperity that the reduction in social welfare is far greater than the increase in welfare to the Medicaid beneficiaries. (I’ve been associated with two articles that suggest that the cost is far greater than the benefit: http://tinyurl.com/2a74gv7 and http://tinyurl.com/2aeajbb.)

    Even worse, Prof. Frakt accepts that Meeicaid beneficiaries have worse access to care than the privately insured. Surely, that is an argument in favor of subsidies supporting premiums for private insurance instead of Medicaid?

    I’m not a huge fan of unemployment insurance (and certainly not extending it for the “99ers”). Nevertheless, but I’d rather my taxes go to UI (which suports income) than force all the unemployed to get groceries, housing, etc. “in kind” from providers working at government-fixed rates.

  12. Nancy says:

    This is about the only place on the Internet where I ever seen any serious discussion of how all the newly insured are going to get more health care. Every one else just assumes they will get more care. Yet, clearly, they may not.

  13. steve says:

    Once again John refuses to tell us if he and his have health insurance.


  14. Frank Timmins says:

    The entire argument as to the fiscal advantages of ACA seems disingenuous (or at least lightly considered). For example Frakt cites (in a Baicker and Chandra blog) supporting data using statistics citing additional hospitalizations resulting from reduced healthcare maintenance (purportedly caused by increased consumer cost sharing). The theory is that the savings created by the consumer cost sharing (reduced premium cost) is overwhelmed by those few who wind up in the hospital as a result of that reduced maintenance. I am not sure if it is possible to prove something like this with statistics, but even if it is it does not take into account that it is likely only delaying the inevitable medical expenses as a healthy person ages.

    A question for Mr. McCanne concerning your mental anguish – How would you describe “health care injustice”, and where have you witnessed same?

  15. John Goodman says:

    Steve, I have health insurance, Jeanette has health insurance, NCPA employees have health insurance, we all have health insurance. Thank god it’s not Medicaid.

  16. Al says:

    Without really having an in depth knowledge of ‘welfare enhancing’ I am assuming based upon what was said that changing from first dollar coverage to a high deductible HSA could be welfare enhancing as one has reduced risk along with gaining extra money in his pocket. If I am correct it sounds like there is a sweet point where ‘welfare enhancing’ could be maximized, but maximization would be dependent upon individual needs, not a one shoe fits all scenario.

  17. Bob Geist says:

    Steve, Uwe–you are baiting NCPA about health insurance–it is financial utility that is involved, not health utility. Insurance is using a small monthly payment to reduce the risk of a large financial loss. Pretty simple. Population health stats (quality and mortality) are primarily functions of poverty and cultural status complicated by “managed care” regulations both here and abroad. Population health stats are not primarily the result of insurance or its lack. Bob

  18. steve says:

    @Bob- Yet that health care must be paid for. Good genetics does trump, or obviate, most medical care, but it is not something you get to choose.

    ” Thank god it’s not Medicaid.”

    Agreed. Lots of docs in my are do not accept it. I believe none of our dermatologists accept it. Most orthopedists do not. My group does.


  19. Erik says:

    So doctors are no longer willing to treat the poor because they do not provide the ROI that doctors prefer.


    See how that looks in writing. I think a little soul searching is in order here.

  20. steve says:

    Ouch. Went back and looked at cited studies. They cover times before the Massachusetts plan was passed.


  21. Doctorsh says:


    If you own a business where your overhead is $100/ hour, and you are getting paid $22/hour, that is not just a poor ROI. That is called charity!
    Medicaid should then be called charity care!
    How bout the govt sets up rules for your business where you get paid below your costs of doing business. Obviously not a sustainable system!

  22. John Baden says:


    “A principle that applies universally is: wealthier is healthier. Another principle: being better educated is healthier.”

    Your observation is another example of a phenomena observed throughout the modernized world; positive values such as wealth, health, education, and intelligence (both innate and acquired) increasingly agglutinate. It’s as though they have a magnetic attraction for one another while repelling their opposites.

    These positive attributes foster but don’t guarantee success. All are fundamentally reinforced by a willingness to defer gratification. And this ability is influenced by intuitive understandings of causality which is surely related to intelligence.

    Try this mental experiment. Assume one is born with higher than average intelligence and health. Then through acculturation and genetics she/he has the propensity to defer gratification. (Low discount rates on a heart attack in 30 years.) What are the implications of these fortunate circumstances? Check the wedding announcements in the Sunday Times. (When our son Brett was inducted into Phi Beta Kappa @ UW he and his 100+ fellows looked remarkably healthy & attractive, far above the UW average.)

    That lucky individual is unlikely to: dropout of school, take dangerous drugs, have unprotected sex, avoid exercise, etc. or consort with those who do. (OK, we all strayed a bit but suffered little permanent damage.)

    Next, assume the alternative, i.e., unhealthy, slow, etc. Then what? Alas, just as positive characteristics are complementary and reinforcing, so are their opposites. While little can be done to influence inherited characteristics, the deferring gratification variable may be strongly influenced by culture, especially religion. Also important is the propensity toward and prevalence of social monitoring. Consider a Mormon community or more extremely, a Hutterite commune.

    This isn’t central to your argument but it is likely that many welfare programs exacerbate existing disadvantages. For example, the best predictor of getting a job is having one–and what does the minimum wage do? Likewise, the second order consequences of price supports for corn includes more obese people going into Walmart. High fructose corn syrup becomes a cheap and seductive additive.

    It’s compellingly obvious that eating healthy food is far more expensive eating cheaply, consider the grades of hamburger. (Ours is $7.00/lb.) Surely one of the worst elements of the welfare sate is exceeding high implicit marginal tax rates imposed on the poor which leads to an unhealthy eating spectrum/meal regime.

    You’ve again produced a neat, seemingly bullet-proof column. I’ll be curious if anyone disagrees.



  23. Francis Kendrick says:

    The supply-demand equation is out of balance. The opportunity to reduce demand needs to pursued. Primary care physicians claim that as much as thirty percent of their practice is overutilization. Why? Why not when a third party is paying the bill? The magic words are “high deductible” insurance. But that means the dirty words “out of pocket”. The dirty words fail to appreciate savings represented by net cost. A real life example is a middle aged family in my town who saved $800 per month by converting a traditional health care plan to a consumer driven plan. The $9,600 saved in one year almost covered the $10,000 deductible, most of which stayed in their pocket rather than for insurance premiums. All of that plus catastrophic protection.

  24. Mark Kellen says:

    Everyone needs to remember there is a difference between health and medical care.

    Health is not smoking, eating correctly, exercising and sleeping regularly, managing stress in life, etc.

    Medical care is what happens when these things are not taken care of and you need the assistance of your doctor.

    If an individual takes better care of themselves their cost of medical care will stay under control. This cannot take place at the government level unless we have a police state.

    To control the cost of medical care individuals must be able to shop for services which meet their needs at the lowest cost possible. Our present third party payment structure prevents this from happening. Cost control of this nature cannot happen at the federal level without rationing.