Affordable Care Act Will Reduce Out-of-Pocket Medical Spending for Many Americans

While out-of-pocket medical expenses for most Americans will decline with the Affordable Care Act (ACA), newly insured consumers under an expanded Medicaid program will save the most money, according to a new RAND Corporation study.

An estimated 11 million Americans who become newly insured under Medicaid can expect to save approximately $1,420 annually in out-of-pocket expenses, researchers say. Those Americans who become newly insured but don’t qualify for government subsidies will most likely see the largest increases in medical spending as they begin paying premiums for health coverage.

The ACA will have a varied impact on health spending by individuals and families, depending primarily on their income and whether they would have been uninsured in 2016 without the program. Out-of-pocket medical expenses for most consumers who become newly insured or change their source of health insurance will decline overall, the report says.

Researchers also studied two states that have chosen not to expand Medicaid: Florida and Texas, finding that health spending will increase for low-income people who remain uninsured or purchase private health insurance in the individual insurance market.

The clearest benefit of the health law is that it will reduce the risk of facing catastrophic medical costs, the report says.

Other key findings from the report include the following:

  • An estimated 3.3 million newly insured Americans on the individual market who have incomes more than four times the federal poverty level are expected to save nearly $2,000 a year in 2016 under the ACA.
  • A Texas resident with an income below the federal poverty level who does not qualify for Medicaid will face costs of $1,831 per year, compared to $28 if they were covered by Medicaid.
  • The estimated 11 million people who become newly insured by Medicaid will reduce their risk of spending at least 10 percent of their income on medical costs from 45 percent to 5 percent.

Researchers used an updated version of the RAND COMPARE microsimulation model, which predicts the effects of health policy changes at state and national levels, to estimate how the ACA is likely to change the out-of-pocket costs (co-pays and deductibles) as well as overall care spending (including plan premiums) for people who will become newly insured and people who will change their source of health coverage.

Source: RAND Corporation, October 1, 2013

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