Health Insurance Helps You Live Longer

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One of the most controversial parts of the Affordable Care Act (aka, the ACA or Obamacare) was the penalty for taxpayers who did not have health care coverage, the so-called individual mandate. The threat of a penalty was intended to incentivize more Americans with no health insurance to sign up for insurance through an ACA exchange.

Millions of Americans did enroll in an ACA plan, but millions more still did not. The act had two primary goals: reduce spending on health care as a portion of gross domestic product and insure more people. Earlier this year, the Center on Budget and Policy Priorities (CBPP) reported that spending on Medicaid in 2019 would total $623 billion, 21.5% lower than the total of $794 billion projected in 2010. Medicare spending was 18.2% lower.

The CBPP commented: “The health spending slowdown has greatly improved the long-run federal budget outlook, as we’ve noted. In early 2010 we projected that federal debt would reach 289 percent of gross domestic product (GDP) by 2048; we now project 113 percent of GDP. Over half of that improvement stems from lower health care costs; the rest largely reflects lower interest rates.”

Americans are spending less on health care and that’s good. But how about health care outcomes? How did the ACA affect health?

A new study published this month by the National Bureau of Economic Research reveals that not only did the ACA save money, it also improved health outcomes in certain groups of Americans.

In 2017, the Internal Revenue Service (IRS) sent an informational letter to 3.9 million randomly chosen taxpayers (from a pool of 4.5 million who met the criteria) who paid the individual mandate penalty in 2016 because they did not have health insurance. The researchers (Jacob Goldin, assistant professor of law at Stanford; Ithai Z. Lurie, a financial economist at the U.S. Treasury Department; and Janet McCubbin, director of individual tax analysis at Treasury) showed that recipients of that letter were 2.8% more likely to sign up for health insurance in the next year.

The researchers then looked at whether the additional insurance coverage reduced mortality among those who enrolled after receiving the letters: “In the two years following the intervention, the rate of mortality among previously uninsured 45-64 year-olds was lower in the treatment group than in the control by approximately 0.06 percentage points or one fewer death for every 1,648 individuals in this population who were sent a letter.”

Through 2017, about 13 million Americans gained health insurance coverage through the Obamacare individual market. Of 330 million people, 26% were between the ages of 35 and 54 and 13% were between 55 and 64. A back-of-the-envelope calculation: Assuming that half of the first group were at least 45 years old, about 13% of all Americans were 45 to 64 years old, or about 42.9 million. That means that more than 26,000 Americans were alive who might otherwise not have lived without health insurance.

The study found no evidence of reduced mortality among children or younger adults.

The researchers also remarked on some of their other observations. Using the individual mandate policy to incentivize people to buy coverage does work, even in the face of what they call “informational frictions like low salience or complexity.” The researchers also noted that, contrary to what some critics believe, the dollar value of the penalties was sufficient to encourage more people to sign up for coverage.

The researchers also commented that while mortality is an important measure, there is no data “on many of the other factors that would enter a careful cost-benefit of outreach, such as financial well-being and health outcomes other than mortality.”

The ACA’s individual mandate was effectively repealed for the 2019 tax year.