Report: ACA reforms could save billions in consumer, federal spending

Adopting additional tax credits and provider payment caps in the individual Affordable Care Act (ACA) markets could make coverage more affordable for consumers while also cutting federal spending, according to a new report. 

Researchers at the Urban Institute modeled the potential of these reforms individually or in tandem. They found that if they were rolled out together, the government could reduce spending by $12 billion in 2020 while also decreasing household spending in aggregate by $9.2 billion and average premiums by $200 per month for those making 400% or more of the poverty level. 

In addition, 1.2 million more people would gain coverage, according to the study. 

Capping payments for individual ACA plans at Medicare rates or introducing a public option would offer the savings needed to extend premium tax credits for such plans to people earning 400% or more of the poverty level, according to the study. 

“What we wanted to do was give an example of what you could do with some targeted dollars freed up from introducing a public option or capping provider payment rates,” Linda Blumberg, institute fellow and one of the report’s authors, told FierceHealthcare. 

RELATED: Urban Institute—ACA exchanges set for stable year after turbulent 2018 

Introducing capped rates or a public option on its own would reduce federal spending by $19.4 billion in 2020, a 5% decline from current spending on Medicaid, the Children’s Health Insurance Program and ACA subsidies.  

It would also reduce household healthcare spending by $10.9 billion and average premiums by $150 per month, according to the study. About 325,000 additional people would be covered. 

Just rolling out the increases to tax credits would increase federal spending by $8.2 billion, according to the study, but consumer spending would decline by $1.7 billion and premiums would decrease on average $130 per month. Nearly a million (912,000) more people would gain insurance coverage. 

Blumberg said there is a lot of political interest in reforms like these to improve the ACA markets and help more people get covered. However, there hasn’t yet been legislation or policy proposed to match Urban’s study. 

Urban’s model, she said, has more teeth than Washington’s “public option,” as it caps payments at Medicare rates. Plus, establishing such a cap at the federal level has more power to push providers to participate, as it would impact a much larger swath of patients. 

“I think that there’s lots of conversations about large comprehensive either enhancements to the ACA or systemwide changes,” Blumberg said, “and I think that those are important, interesting convos to have.”