The Effects of Health Reform on Medicaid and Private Insurance in the Long Run

Starting in 2014 the Patient Protection and Affordable Care Act of 2010 (PPACA) expands eligibility for Medicaid, creates state-based, federally subsidized insurance exchanges, and mandates that all Americans obtain health insurance coverage. In 2018 it imposes an excise tax on high-premium insurance plans to help control costs and pay for the expanded coverage. If health costs continue to grow faster than inflation, this tax will affect a growing fraction of plans over time. Most analyses of PPACA have been limited to the standard 10-year budget planning horizon, so they do not study the impact of the tax as it grows. We use standard methods and recent data to estimate the effects of Medicaid eligibility and tax rates on public and private insurance enrollment and then simulate the consequences of PPACA over the next 20 years. We find that the effects will be small at first, but will grow substantially from 2020 to 2030. If the rate of growth of health care costs is not reduced, we predict that Medicaid will nearly triple in size and the proportion of families qualifying for federally subsidized insurance through exchanges will grow steadily as well, putting state and federal budgets under increasing pressure.