Has the affordable care act affected health care efficiency?
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Has the affordable care act affected health care efficiency? Russ Kashian1 · Nicholas Lovett1 · Yuhan Xue1 Accepted: 29 September 2020 / Published online: 15 October 2020 © Springer Science+Business Media, LLC, part of Springer Nature 2020
Abstract We utilize health care input and output data to evaluate how state-level efficiency in health care has changed in the wake of the Affordable Care Act (ACA). We use a Stochastic Frontier model to estimate annual measures of technical and cost efficiency before, and after, ACA implementation. Results show that following the ACA, states’ technical efficiency scores improved and converged across states. However, cost efficiency scores declined suggesting health outputs rose by a proportionally smaller margin than health care costs. We further investigate efficiency changes for ACA-induced Medicaid expansions. We find Medicaid expansion led to decreased cost efficiency scores, but may have led to increased technical efficiency scores. Overall, results suggest the ACA represents a package of reforms that present a trade-off between technical and cost efficiency. Keywords Affordable care act · Efficiency · Health care · Stochastic frontier analysis JEL Classification D61 · I11 · I18 · L51
1 Introduction American per capita health care expenditures are the highest of all OECD countries, with mean per capita expenditures of nearly $8000, while Norway, the next highest
We wish to thank Mary Cummins, Robert Drago, Mary Kay Grasmick, Derrek Grunfelder-McCrank, Andrew Keuffer, Jeremy Peterson, Brian Potter, and numerous conference participants for their significant contributions to this paper. We also wish to thank anonymous referees for very valuable comments and suggestions that greatly improved the paper. All errors are our own. Electronic supplementary material The online version of this article (https://doi.org/10.1007/s11149020-09417-w) contains supplementary material, which is available to authorized users.
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Nicholas Lovett [email protected] Department of Economics, College of Business and Economics, University of Wisconsin Whitewater, Whitewater, WI 53190, USA
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OECD country by expenditures, averaged only $5300.1 Despite spending so heavily, American health care outcomes are often viewed as mediocre, with OECD data reporting a US ranking of 26th in life expectancy and 31st in infant mortality. At the heart of many criticisms is the assertion that American health care systems are inherently inefficient with as much as 30% of spending, or 5% of GDP, essentially wasted (Fisher et al. 2009; Cutler 2010). In the face of these apparent disparities between spending and health outcomes, there have been considerable efforts and reforms that have sought to improve health care outcomes, access, and efficiency. Paramount among these reforms was the Affordable Care Act (ACA), which has considerably altered American health care, and fundamentally changed the regulatory landscape in which health care choices are made. Throughout the proposal, passage, implem
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