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The Effect of the Affordable Care Act's Expanded Dependent Coverage Policy on Healthcare Spending and Utilization
To examine the effects of the Affordable Care Act's (ACA) dependent coverage policy, which requires employer-sponsored insurance plans to offer coverage to dependents until age 26, on health care spending and utilization.
Data and Methods
State identifiable Medical Expenditure Panel Survey Data (MEPS) data from 2002-2011 were used to estimate the effect the ACA's dependent coverage policy by using a difference-in-differences regression to compare spending between those ages 19-25 to those ages 26-30. To control for existing state policies, a triple-differences regression used state policy eligibility criteria to identify those who are newly eligible for dependent coverage. Total spending by public payers, private insurers, and individuals were examined separately. Spending on emergency room, inpatient, outpatient, physician visits, and prescription drugs by each payer were also examined separately by payer. OLS regressions controlling for demographics (age, sex, and race), medical conditions (BMI, and existing chronic conditions), and state fixed effects were used to estimate each model. The policy’s effective date is September 2010, so this analysis estimates the effect of the first full year of the policy.
Results
For all young adults, the ACA's policy decreases inpatient out-of-pocket spending but has no distinguishable effect on total OOP spending. Total private insurer spending increased by 41%, which was driven by 46% and 37% increases in private spending on office-based visits and prescription drugs, respectively. Among those not eligible for dependent coverage through existing state laws, prescription drug and emergency room out-of-pocket spending decreased by 50% and 28%, respectively. Public spending for emergency room, office visit, outpatient, and prescription drug services decreased by 25%, 35%, 23%, and 31%, respectively. Private spending was largely unaffected.
Utilization does not change in the difference-in-differences model but emergency room visits and prescription drug fills decrease in the triple-differences model. After accounting for existing state dependent coverage laws, private insurance enrollment increased by 10.9 percentage points while Medicaid enrollment decreased by 5.8 percentage points.
Conclusion
In the first year of implementation, the ACA's dependent coverage policy led to substantial decreases in both individual and public health spending across several health service types.