Has the Affordable Care Act Affected Health Care Efficiency?

41 Pages Posted: 9 Sep 2018

See all articles by Russell Kashian

Russell Kashian

University of Wisconsin - Whitewater - Department of Economics

Nicholas Lovett

University of Wisconsin - Whitewater

Yuhan Xue

University of Wisconsin - Whitewater

Date Written: April 10, 2018

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, the implementation of the ACA. Results show that following the ACA, states’ technical efficiency improved and converged across states. However, cost efficiency declines suggest health outputs rose by a proportionally smaller margin than health care costs. Plausible explanations are a lack of substitutability between emergency care and preventive care, the presence of moral hazard in health care markets, and declining marginal returns to increased health care expenditures. The above pattern of results is repeated with greater magnitude for states that expanded Medicaid coverage. The results suggest the ACA represents a package of reforms that present a trade-off between technical and cost efficiency.

Suggested Citation

Kashian, Russell and Lovett, Nicholas and Xue, Yuhan, Has the Affordable Care Act Affected Health Care Efficiency? (April 10, 2018). Available at SSRN: https://ssrn.com/abstract=3239540 or http://dx.doi.org/10.2139/ssrn.3239540

Russell Kashian

University of Wisconsin - Whitewater - Department of Economics ( email )

800 West Main Street
Whitewater, WI 53190
United States

Nicholas Lovett (Contact Author)

University of Wisconsin - Whitewater ( email )

800 West Main Street
Whitewater, WI 53190
United States

Yuhan Xue

University of Wisconsin - Whitewater ( email )

800 West Main Street
Whitewater, WI 53190
United States

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