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Affordable Care Act subsidies reduce health care costs for low-income Americans

A Stanford Medicine researcher finds that the Affordable Care Act's insurance subsidies have protected low-income Americans against high medical costs.

The insurance subsidies established under the 2010 Affordable Care Act help protect low-income U.S. residents against high health care costs, a Stanford researcher has found.

"Those subsidies did what they were intended to do, which is to make health care costs more affordable," said Charles Liu, MD, a general surgery resident at Stanford Medicine.

An article about his research appears in Health Affairs.

Previous studies have shown that one aspect of the ACA -- expanding Medicaid to more Americans -- has helped those who qualify for the public insurance program avoid high health care costs. But there has been less research looking into whether the ACA's insurance subsidies offer the same protection.

Under the ACA, U.S. residents can receive assistance purchasing health coverage through state or federal marketplaces if they meet certain income requirements, lack insurance through their work, and fail to qualify for government programs such as Medicare and Medicaid.

Liu and his colleagues used surveys, taken from 2008 to 2017 of nearly 128,000 American households, in which respondents were asked what they spent on health care costs. Comparing the answers before and after the ACA was enacted, the researchers found that residents who earned up to $30,150 ($61,500 for a family of four) and were eligible for the ACA's most generous subsidies spent about 17% less annually on health care costs.

More critically, they found that these households were about 30% less likely to face "catastrophic" health care costs, or costs that exceeded 10% of their annual income.

Benefits for low-income residents

For middle-income Americans, however, the subsidies made little difference in their health care spending. Those with higher incomes receive less financial assistance in purchasing insurance on the ACA marketplaces.

"The subsidies help, but really only the most generous subsidies help," Liu said.

He added that other aspects of the ACA, such as requirements that people with pre-existing conditions be offered insurance, may also help lower-income Americans more than middle- or high-income Americans. Wealthier people, even before the ACA was enacted, often have more comprehensive health insurance, he noted.

During his residency, Liu spent two years at a University of California, Los Angeles research fellowship studying health care affordability, and the current study is an outgrowth of that work. As a surgery resident, he said, he's become aware of the burden that surgery -- a high-cost intervention -- can impose on people without adequate coverage.

"I hope that policymakers will see the article and gain a more detailed understanding of how the subsidies did and didn't help people," he said.

Liu plans to conduct more specific research about the ACA's effects on Americans' finances, including a look at different states' approaches to the ACA. He also plans to study underinsurance, in which people have health insurance, but it doesn't protect them against catastrophic health care costs.

He added that although the ACA insurance subsidies appear to have helped many, "We still have a long way to go. Millions of Americans every year still face catastrophic health care spending. We haven't solved the problem by any stretch."

Photo by Alexander Mils

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