Brief How Policies to Expand Insurance Coverage Affect Household Health Care Spending
Michael Simpson, Andrew Green, Jessica Banthin
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The recently passed Inflation Reduction Act extended the enhanced health insurance tax credits first introduced by the American Rescue Plan Act. This legislation could serve as a foundation for additional reforms to further expand coverage and make health care more affordable, especially for those with the greatest needs.

To illuminate who could benefit from additional reform, we analyze the financial impact for U.S. households of a health reform package that would: 1) fill the Medicaid coverage gap in states that have not expanded medicaid eligibility; 2) reduce the employer affordability threshold; 3) add a $10 billion reinsurance fund; 4) increase the federal Medicaid matching rate in expansion states; and 5) reduce cost sharing in marketplace plans. We use the Urban Institute’s Health Insurance Policy Simulation Model to assess changes in household spending on health care in dollars and as a percentage of income.

The reforms reduce health spending for targeted households. Reductions would be greatest for households spending the most on health care, both in dollars and as a share of income. Filling the Medicaid coverage gap would lead to substantial savings for low-income households in states that haven’t expanded Medicaid. Households also see significant savings from enhanced and funded cost-sharing subsidies.

distribution of household health care spending under IRA and health reforms

Research Areas Health and health care Wealth and financial well-being
Tags Federal health care reform Health care spending and costs Health insurance
Policy Centers Health Policy Center
Research Methods Microsimulation modeling Quantitative data analysis