Health care spending would drop $11.4B without premium credit expansion
If the enhanced premium tax credits in the American Rescue Plan Act aren't extended, many Americans will no longer be able to afford care.
Total health care spending in the United States is expected to drop by more than $11.4 billion if enhanced premium tax credits in the American Rescue Plan Act expire, a new report has found.
“The enhanced premium tax credits that were part of ARPA have increased affordability and enrollment,” said Katherine Hempstead, senior policy advisor for the Robert Wood Johnson Foundation. “Allowing them to lapse will throw that process into reverse, especially in the face of rising premiums. We face a coverage cliff if Congress fails to act.”
Related: End to ACA tax credits could leave 3 million uninsured
The act increased premium tax credits for Marketplace coverage and extended eligibility to people with incomes above 400% of the federal poverty level. Consequently, Marketplace enrollment reached a record high during the 2022 open enrollment.
A report from the Urban Institute with support from the Robert Wood Johnson Foundation found that allowing the credits to expire would result in spending decreases of:
- $3.8 billion on hospital services,
- $1.3 billion on services in physician practices,
- $3.4 billion on other services and
- $2.8 billion on prescription drugs.
In addition, 3.1 million more people will be uninsured, and individuals and families enrolled in the Marketplaces or other nongroup coverage will pay hundreds of dollars more per person in annual premiums.
Florida, Georgia, North Carolina, South Carolina and Texas would see the largest spending declines. These states had the highest enrollment increases in the 2021 open enrollment. In Texas, hospital spending would decline by $1 billion, and total health care spending would decline by $2.7 billion. By contrast, California, Massachusetts, New York and Vermont, which had state programs providing enhanced credits or cost-sharing reductions before the ARPA was enacted, would see virtually no change in health care spending, because those programs would remain in place even if federal enhanced are allowed to expire.
Uninsured parents and children are much more likely than those with health coverage to delay care because of costs and problems paying medical bills and have greater unmet health care needs. The uninsured also are much less likely to have seen a doctor or dentist over the past 12 months. Forgoing health care has serious consequences, because having health coverage decreases mortality. Therefore, if enhanced credits are not renewed, not only would the revenue of health care providers be reduced but three million people would become uninsured, receive less health care and likely experience greater morbidity and financial insecurity.
“The end of the enhanced premium tax credits will lead to a massive decline in health spending, because uninsured people are less likely to access medical care,” the report concluded.
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