Income Responses to the Affordable Care Act: Evidence from a Premium Tax Credit Notch.

We examine responses to the ACA subsidy for Marketplace health insurance in the first year of subsidy availability. Drawing on federal tax data and focusing on a notch in the schedule where eligibility is lost, we document that taxpayers lowered their income to remain eligible for the subsidy. The observed bunching is modest relative to the size of the notch, which, consistent with larger responses we detect in additional analyses among certain subgroups, is likely explained by significant optimization frictions. Finally, we find suggestive evidence that increased deductions drive some of the response, while reduced labor supply also plays a role.

Long-Term Impacts of Childhood Medicaid Expansions on Outcomes in Adulthood.

We use administrative data from the IRS to examine long-term impacts of childhood Medicaid eligibility expansions on outcomes in adulthood at each age from 19-28. Greater Medicaid eligibility increases college enrollment and decreases fertility, especially through age 21. Starting at age 23, females have higher contemporaneous wage income, although male increases are imprecise. Together, both genders have lower mortality. These adults collect less from the earned income tax credit and pay more in taxes. Cumulatively from ages 19-28, at a 3% discount rate, the federal government recoups 58 cents of each dollar of its "investment" in childhood Medicaid.

The Impact of the ACA on Premiums: Evidence from the Self-Employed.

This article examines the impact of the Affordable Care Act on premiums by studying a segment of the nongroup market, the self-employed. Because self-employed health insurance premiums are deductible, tax data contain comprehensive individual-level information on the premiums paid by this group prior to the establishment of health insurance exchanges. We compare these prior premiums to reference silver premiums available on the exchanges and find that exchange premiums are 4.2 percent higher on average among the entire sample but 42.3 percent lower on average after taxes and subsidies. We also examine which type of exchange coverage would cost less than the individual's prior health insurance premiums and find that almost 60 percent of families could purchase bronze plans for less than their prior premiums, though only about a quarter could purchase platinum plans. After taxes and subsidies, the fractions increase to over 85 percent for bronze plans and over half for platinum plans.

Did reform of the non-group health insurance market affect the decision to be self-employed? Evidence from state reforms in the 1990s.

This paper estimates whether state-level implementation of community rating and guaranteed issue regulations in the non-group health insurance market during the 1990s affected the decision of taxpayers to be self-employed. Using a panel of tax returns that span 1987-2000, we find no statistically significant effect of the reforms on the propensity to be self-employed overall, although we find evidence of an increase in self-employment among older taxpayers and weaker evidence of decreases among younger cohorts.

Understanding the increasingly popular itemized deduction for medical expenses.

Itemized deduction for medical expenses has existed in one form or another for more than 60 years. One justification for this tax deduction is that it reduces the burden for taxpayers with catastrophic expenses. Currently it shields more out-of-pocket spending on health care from taxes than any other tax provision. Based on a repeated cross section from 1999 to 2005 and a 5-year panel of tax returns, we find that filers aged 65 years or older claim the deduction more often, deduct larger amounts, and do so more persistently than younger taxpayers. Augmenting tax data with information from the MEPS, we find that no more than 41% of all tax units with non-tax preferred medical expenditures exceeding 10% of income claimed the deduction in 2005. Even for those claiming the deduction, the average tax benefit of the deduction offsets less than 10% of medical expenditures.

Do increased premium subsidies affect how much health insurance is purchased? Evidence from the self-employed.

This paper estimates the effect of recent federal and state level increases in the deductibility of health insurance premiums for self-employed individuals, which reduced the after-tax price of health insurance, on both the take-up of coverage and the amount of insurance purchased. Using a panel of tax returns filed by self-employed taxpayers from 1999 to 2004, we estimate a take-up elasticity of -0.316 overall, with significantly higher elasticities for single taxpayers. On the intensive margin, we find an elasticity of -0.733 overall.

Differences in medical care expenditures for adults with depression compared to adults with major chronic conditions.

BACKGROUND: Approximately 17.1 million adults report having a major depressive episode in 2004 which represents 8% of the adult population in the U.S. Of these, more than one-third did not seek treatment. In spite of the large and extensive literature on the cost of mental health, we know very little about the differences in out-of-pocket expenditures between adults with depression and adults with other major chronic disease and the sources of those expenditures. AIMS: For persons under age 65, compare total and out-of-pocket expenditures of those with depression to non-depressed individuals who have another major chronic disease. METHODS: This study uses two linked, nationally representative surveys, the 1999 National Health Interview Survey (NHIS) and the 2000 Medical Expenditure Panel Survey (MEPS), to identify the population of interest. Depression was systematically assessed using a short form of the World Health Organization's (WHO) Composite International Diagnostic Interview--Short Form (CIDI-SF). To control for differences from potentially confounding factors, we matched depressed cases to controls using propensity score matching. RESULTS: We estimate that persons with depression have about the same out-of-pocket expenditures while having 11.8% less total medical expenditures (not a statistically significant difference) compared to non-depressed individuals with at least one chronic disease. DISCUSSION: High out-of-pocket expenditures are a concern for individuals with chronic diseases. Our study shows that those with depression have comparable out-of-pocket expenses to those with other chronic diseases, but given their lower income levels, this may result in a more substantial financial burden. IMPLICATION FOR POLICY: High out-of-pocket expenditures are a concern for individuals with depression and other chronic diseases. For both depressed individuals and non-depressed individuals with other chronic diseases, prescription drug expenditures contribute most to out-of-pocket expenses. Given the important role medications play in treatment of depression, high copayment rates are a concern for limiting compliance with appropriate treatment.

Trends in out-of-pocket medical care expenditures for Medicare-age adults with arthritis between 1998 and 2004.

OBJECTIVE: To provide estimates of the growth in out-of-pocket (OOP) medical expenditures for persons with arthritis. METHODS: OOP medical expenditures were estimated for 1998-2004 based on 7 panels of the Medical Expenditures Panel Survey, which provide nationally representative data. A simple simulation then extrapolated the data through 2006, for which the potential effects of Medicare Part D drug coverage were computed. RESULTS: Median total OOP expenditures for persons with arthritis showed an increase of 52.4% between 1998 and 2004 (7.3% annually beyond inflation). Median OOP expenditures for prescription medication showed larger growth, at 72.0%. Medicare Part D was predicted to lower both total and prescription OOP expenditures and return them close to 2003 levels. Simulation limitations included exclusive use of the standard Medicare Part D benefit structure and the assumption of stable prescribing trends during this period. CONCLUSION: High prescription drug expenditures are likely to continue to be an issue, both for individuals faced with increasing OOP burden and for policy makers faced with increasing budgetary shortfalls to fund increasing Medicare expenses.

The effects of expanded mental health benefits on treatment costs.

BACKGROUND: Mental health disorders represent one of the most common problems facing adults in the labor force. It is estimated that within a 12-month period nearly 30% of the US population experiences some diagnosable mental health or addictive disorder. This study examines the impact that corporate benefit policies can have on mental health treatment costs. AIMS: To measure the effects of a change in mental health benefit design on treatment expenditures for employees of a large US-based company. METHODS: Data came from mental health treatment administrative claims and eligibility information provided by the company and a comparable set of claims for a randomly selected control group for the years 1995-1998. We measure the effect of a change in mental health benefits consisting of three major elements: a company-wide effort to destigmatize mental illness; reduced cost-sharing for mental health treatment; and the implementation of a provider network that emphasized access to non-physician mental health specialists. We use a two-part regression model within a difference in differences framework to examine outpatient, pharmaceutical, and combined outpatient and pharmaceutical expenditures between the treatment company and the control group. RESULTS: We find that the program led to a statistically significant dollar 17 increase in outpatient costs (excluding pharmaceutical costs) per employee. Similar to outpatient care we find that the benefit change was associated with a statistically significant increase in pharmaceutical costs of about dollar 15. DISCUSSION: The results reveal that the mental health benefit expansion at the company led to a significant increase in aggregate mental health expenditures among employees. However, the aggregate increase in cost masks a number of interesting underlying trends in mental health utilization. First, conditional upon any mental health treatment, mental health costs were virtually unchanged before and after the benefit change. Conditional on any use, outpatient and pharmaceutical expenditures went in opposite directions, with outpatient expenditures falling and pharmaceutical expenditures increasing. IMPLICATIONS FOR HEALTH CARE PROVISION AND USE: Private sector initiatives can increase use of mental health care treatment through decreased cost-sharing, improved access to specialty providers, and destigmatization of mental disorders. IMPLICATIONS FOR HEALTH CARE POLICY FORMULATION: Given that the vast majority of people in the US get their health insurance through employer-sponsored health insurance, efforts on the part of the private sector to recognize and treat serious chronic illnesses such as mental disorder in a proactive manner should be encouraged. IMPLICATIONS FOR FUTURE RESEARCH: While the aggregate cost of corporate initiatives to improve access to quality mental health care is frequently examined, it is also important to decompose the aggregate cost changes into effects from a change in the rate of initiation and changes in utilization conditional upon initiation.

Expanded mental health benefits and outpatient depression treatment intensity.

BACKGROUND: The justification for higher cost-sharing for behavioral health treatment is its greater price sensitivity relative to general healthcare treatment. Despite this, recent policy efforts have focused on improving access to behavioral health treatment. OBJECTIVES: We measured the effects on outpatient treatment of depression of a change in mental health benefits for employees of a large U.S.-based corporation. RESEARCH DESIGN: The benefit change involved 3 major elements: reduced copayments for mental health treatment, the implementation of a selective contracting network, and an effort to destigmatize mental illness. Claims data and a difference-in-differences methodology were used to examine how the benefit change affected outpatient treatment of depression. SUBJECTS: Subjects consisted of 214,517 employee-years of data for individuals who were continuously enrolled for at least 1 full year at the intervention company and 96,365 employee-years in the control group. MEASURES: We measured initiation into treatment of depression and the number of outpatient therapy visits. RESULTS: The benefit change was associated with a 26% increase in the probability of initiating depression treatment. Conditional on initiating treatment, patients in the intervention company received 1.2 additional (P < 0.001) outpatient mental health treatment visits relative to the control group. CONCLUSIONS: Our results suggest that the overall effect of the company's benefit change was to significantly increase the number of outpatient visits per episode of treatment conditional on treatment initiation.

The effect of distance to provider on employee response to changes in mental health benefits.

We assess whether distance to provider moderates the effect of a change in mental health benefits on treatment initiation of employees of a large US-based company for psychiatric disorders. Mental health treatment administrative claims data plus eligibility information provided by a Fortune 50 company for the years 1995-1998 are used for the analysis. The effect of distance is measured using the relative effect of the initiative on residents living far from providers compared to those living close to providers. We model the probability of treatment initiation using a random effects logit specification. We find that the effect of distance to provider has the potential to over-shadow other incentives to initiate treatment, especially at distances greater than 4 miles. These results lend further support to the notion that geographic dispersion of providers should be an important consideration when forming a selective contracting network.

The effect of expanded mental health benefits on treatment initiation and specialist utilization.

OBJECTIVE: To measure the effects of a mental health benefit design change on treatment initiation for psychiatric disorders of employees of a large U.S.-based company. DATA SOURCES: Mental health treatment administrative claims data plus eligibility information provided by the company for the years 1995-1998. STUDY DESIGN: We measure the effect of a change in mental health benefits consisting of three major elements: a company-wide effort to destigmatize mental illness; reduced copayments for mental health treatment; and an effort to increase access to specialty mental health providers. DATA EXTRACTION METHODS: We identified the subsample of employees that were continuously enrolled in the company's health plan over the period 1995-1998, were between the ages of 18 and 65, and were actively employed. PRINCIPAL FINDINGS: Our results suggest that the combined effect of destigmatization and reduced copayments led to an 18 percent increase (p<.01) in the probability of initiating mental health treatment. The results suggest that the effort to increase access to specialty providers was effective, but only for nonphysician providers: initiation at nonphysician mental health providers increased nearly 90 percent (p<.01) relative to nonspecialty providers, while use of psychiatrists declined by nearly 40 percent (p<.01). CONCLUSIONS: Our results suggest that the benefit change increased initiation for mental health treatment overall and encouraged the use of nonphysician specialty mental health providers.