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BUSINESS OF
MEDICINE
Market Dynamics in the Wake
of the Patient Protection and
Affordable Care Act
Lee W. Bewley, Ph.D., FACHE
Whether a provider of healthcare services or patient and beneficiary healthcare consumer expectations.
of one of the many healthcare systems in the United States, most Amer- The dual effect of enhanced income and consumer expectations
icans recognize that the Patient Protection and Affordable Care Act of
2010 meaningfully impacted the United States healthcare system. for healthcare services would be expected to generate substantial de-
mand within individual healthcare markets and in aggregate across
The prime intended effects of this act were to expand citizens’ ac- the country. On the other hand, the Affordable Care Act did not
cess to healthcare and to moderate healthcare cost dynamics through address supply factors with a corresponding level of emphasis be-
a number of mechanisms including: employer and individual man- yond the potential of increasing producer expectations for future
dates, minimum insurance coverage, elimination of pre-existing con- revenue and/or profits associated with increased demand; however,
ditions and catastrophic coverage caps, constraining insurance the potential positive impact of increased supply through producer
medical loss ratios, and implementing a host of expanded eligibility expectations may well have been moderated due to the Act’s provi-
initiatives to facilitate participation in Medicaid and privately-pur- sions for cuts to Medicare reimbursement rates, taxes on medical
chased health insurance. devices, and implications that healthcare organizations and providers
may need to fundamentally change delivery systems. The net market
The results after nearly five years indicate a meaningful decrease effect in the short to intermediate term indicates that an increase in
in the number of uninsured, but nearly 32,000,000 citizens or about demand matched with constant supply would likely result in in-
12 percent of the population do not have consistent healthcare fi- creased prices and/or diminished access to services.2
nancing and healthcare costs continue to rise.1
A quick review of market statistics during the period 2010 – 2014
A summary review of basic economic market dynamics can pro- illustrates key elements of the economic market effects of the Af-
vide a framework to understand what is occurring in the various fordable Care Act.
healthcare markets across the United States and in aggregate within
the entire system. These data indicate that the demand effects of the Affordable Care
Act coupled with other effects such as the “Silver Tsunami” of
The preponderance of the Affordable Care Act provisions are fo- Medicare-eligible beneficiaries described by my colleague Dr. Dana
cused on stimulating demand for healthcare services. Providing ex- Forgione yielded substantial increases in healthcare expenditures
panded eligibility for Medicaid and subsidized health insurance during the period 2010 – 2014. Given the scant 8 percent increase
through exchanges is effectively an increase in resources or income in the healthcare and social assistance workforce during this period,
for the market of health services. Furthermore, expanding minimum the apparent modest contraction of hospitals in the United States,
healthcare insurance coverage, access to health insurance, and elim- and only a 4 percent increase (2012 – 2014) in licensed practicing
inating catastrophic coverage caps should be expected to bolster
Elements of Market Demand for Healthcare3
Continued on page 36
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