In the past decade, 2 new, large federal health insurance programs have been implemented: Medicare’s prescription drug program (Part D) and the Affordable Care Act’s (ACA’s) coverage expansion. These programs have some similarities, but have received very different public and political treatment. Although both were controversial at time of passage, only the ACA remains as controversial, if not more so, than it was on the day it was signed into law. Is this disparate treatment warranted by the evidence on the merits of the 2 programs?
Part D and its Costs
The Part D benefit is administered entirely through private plans. Although the federal government negotiates lower drug prices for all its other large health care programs (such as Medicaid and the Veterans Health Administration), it is prohibited from doing so in Part D. Instead, plans negotiate—often through pharmacy benefits management organizations—with drug manufacturers and compete with one another in a market.
Beneficiaries pay a discounted premium, with subsidies established through a competitive bidding process. In 2012, 63% of the nation’s 49.7 million Medicare beneficiaries were enrolled in a Part D plan, and 86% of Medicare beneficiaries had drug coverage through Part D or an actuarial equivalent, up from 76%with any prescription drug coverage before Part D was implemented.
The entire arrangement will cost taxpayers an estimated $1.11 trillion from 2015-2024, according to the Congressional Budget Office (CBO), minus the cuts from sequestration, and is financed with debt (contemporaneous taxes will not actually increase).
The ACA and its Costs
The CBO estimates that the ACA’s coverage expansion will cost about the same amount as Medicare Part D—$1.38 trillion—and is financed through reductions in other health spending (such as Medicare cuts) and tax increases. It is also implemented, in part, in a fashion similar to that of Part D.
For individuals not eligible for Medicaid or without an affordable, employer-based plan, coverage expansion will largely occur through subsidized private plans competing in state exchanges (many run by the federal government). Subsidy levels are established through a competitive bidding process, different in detail but not in spirit to Part D.
By year 2024, 25 million people are expected to be enrolled in an exchange plan, according to CBO estimates. Under the ACA, the percentage of US individuals with health insurance is expected to grow from to 89% by year 2024, up from 84.6% in year 2012.
A Look at Outcomes
So much for structural similarities; what about outcomes? What will these 2 programs do? What they will not do is pay for themselves—not by a long shot. It’s folly to think that by increasing access to preventive care through expansion of insurance coverage, fewer acute hospitalizations or reduced use of emergency care will fully offset the ACA’s costs. Almost no preventive care pays for itself. Likewise, Medicare Part D’s expansion of drug coverage for Medicare beneficiaries didn’t pay for itself either.
To be sure, coverage expansions provide access to care that is valuable (although not all of it is) and improves the lives and financial well-being of the newly covered. So, it’s a question of value for money. Coverage expansions—Part D and the ACA—cost money and in return some Americans have better lives. How much better?
This is a difficult question to answer comprehensively, but recent work provides some clues. In what is, to my knowledge, the only study of the association of prescription drug insurance and mortality, Robert Kaestner, PhD, MA; Cuiping Long, MA; and G. Caleb Alexander, MD, MS, examined Medicare data from 2002 to 2009 to assess the effect of Part D. Although they found evidence that Part D is associated with decreases in hospital admissions and the severity of admissions, they found no evidence of an association with reduced mortality. However, the hospital admissions and severity results suggest reduced morbidity.
Earlier this month, a study by Benjamin Sommers, MD; Sharon Long, PhD; and Katherine Baicker, PhD, published in the Annals of Internal Medicine examined the association of Massachusetts’ coverage expansion with mortality. (I wrote an editorial on their article that appeared in the same issue.) They found a statistically significant reduction in mortality of 2.9% associated with reform in Massachusetts counties, relative to control counties in other states. Mortality amenable to health care interventions decreased by 4.5% relative to control counties.
Because the ACA’s coverage expansion is modeled on Massachusetts’, this provides some early support for the hypothesis that the ACA will be associated with mortality reductions as well. These findings add to a body of evidence that generally (though not universally) finds insurance coverage associated with lower mortality and morbidity.
From this evidence alone, it would seem that there’s at least as good a reason to view the ACA as favorably as Medicare Part D. They cost about the same, they share some similar design features, and based on work to date, the former is more likely to reduce mortality than the latter. And yet, though Part D is now as American as apple pie, the ACA remains hotly contested. If you could prescribe either Part D or the ACA to a patient but not both, which would you choose?
The author thanks Daniel Liebman for tracking down some of the references cited in this post.
About the author: Austin B. Frakt, PhD, is a health economist with the Department of Veterans Affairs and an associate professor at Boston University’s School of Medicine and School of Public Health. He blogs about health economics and policy at The Incidental Economist and tweets at @afrakt. The views expressed in this post are that of the author and do not necessarily reflect the position of Boston University.
About The JAMA Forum: JAMA has assembled a team of leading scholars, including health economists, health policy experts, and legal scholars, to provide expert commentary and insight into news that involves the intersection of health policy and politics, economics, and the law. Each JAMA Forum entry expresses the opinions of the author but does not necessarily reflect the views or opinions of JAMA, the editorial staff, or the American Medical Association. More information is available here and here.