Declines in Uncompensated Care Costs for the Uninsured under the ACA and Implications of Recent Growth in the Uninsured Rate

The increase in the uninsured rate in recent years, as well as loss of coverage during the pandemic, has led to attention on the consequences of being uninsured. The need for medical care to test, treat, or prevent COVID-19 has also highlighted the potential consequences ofuncompensated care for uninsured people. Uncompensated care costs occur because, although people who are uninsured use less care than people with coverage, most who are uninsured have limited income or resources and cannot afford the high cost of medical care, if and when they do need or use health care. To understand the potential implications of coverage shifts for uncompensated care, this analysis uses the Medical Expenditure Panel Survey (MEPS) to examine how uncompensated care costs for the uninsured changed following implementation of the ACA’s coverage provisions in 2014. We define uncompensated care as costs not covered by the individual’s health insurance (if they had insurance at some point in the year) or out-of-pocket payments. We consider uncompensated care across a wide range of services and settings and compare average annual costs over two time periods, 2011-2013 and 2015-2017, to assess the effect of the ACA’s major coverage expansion. We also examine changes in sources of payment for uncompensated care costs between the two periods. Key findings include:

• Reflecting a significant decline in the share and number of people who were uninsured at any point in the year, the average annual share of nonelderly individuals who had any uncompensated care costs fell by more than a third following ACA implementation, going from 7.3 percent in 2011-2013 down to 4.8 percent in 2015-2017. This change represents a decline in the number of people with uncompensated care costs from 20.2 million to 13.1 million.
• Correspondingly, the aggregate annual cost of uncompensated care provided to uninsured individuals dropped by a third following implementation of the ACA’s coverage provisions, from an average of $62.8 billion per year in 2011-2013 to $42.4 billion in 2015-2017. The cost of implicitly subsidized uncompensated care—or care that had no payment source, including a non-health insurance source—dropped from $21.6 billion to $15.1 billion per year on average before and after the ACA, respectively.
• Despite declines in total amounts, the distribution of total aggregate spending for the uninsured (including amounts paid out-of-pocket and expenses uncompensated) was similar across the two periods, with the majority (approximately 70%) uncompensated and about 20% paid out of pocket by uninsured people both before and after the ACA.
• Uncompensated care costs declined across most provider and service types, and the distribution of costs of uncompensated care by service type was similar both before and after the ACA, with hospitals continuing to be the site of care for approximately 60% of uncompensated care

While this analysis finds significant declines in uncompensated care across providers and services following the ACA coverage expansions, the nation still faces sizable uncompensated care costs. Asdetailed elsewhere, while providers incur significant costs in caring for the uninsured, the bulk of their costs are compensated through a web of complex funding streams that are financed largely with public dollars. However, these approaches may be inefficient, may not target funds to providers with the most uncompensated care, or may still leave uninsured people with bad debt, credit issues, or even bankruptcy. Provider charity covers some of the remaining uncompensated care costs, and a very small share,estimatedto account for less than one percent of private insurance payments, is potentially covered through cost-shifting to those with private insurance. Even before the pandemic, the uninsured rate in the United States had ticked up in recent years; potential losses of coverage due to pandemic-related job loss could exacerbate these losses and reverse to some extent the significant coverage gains seen since the full implementation of the ACA in 2014. At the same time, recent efforts – including reopening of ACA enrollment by the Biden Administration and enhanced premium subsidies and new incentives for states to expand Medicaid under the American Rescue Plan – could increase the number of people covered.