The ACA is making medical debt a little less red

Medical debt is falling thanks to higher insurance rates under the Patient Protection and Affordable Care Act (ACA) (P.L. 111-148), according to a study by the National Bureau of Economic Research (NBER). The study estimates that the medical debt held by people with new Medicaid coverage fell between $600 and $1000 each year since 2014. Additionally, the study determined that the ACA’s Medicaid expansions resulted in beneficial financial impacts that extend beyond the use of and access to health care.


The financial impacts of not having health insurance can be severe. According to data from the Medical Expenditure Panel Survey (MEPS), the annual cost of inpatient care for a person aged 18 to 64 who was hospitalized in 2012 was approximately $15,000 and the annual cost of all types of care for that person for the year was $25,000. Thus, it is hardly surprising that those without insurance are more likely to have difficulty paying, become delinquent on, and be contacted by a collection agency regarding their medical bills. The study cited data suggesting that when an uninsured individual is hospitalized, that individual doubles their likelihood of bankruptcy and experiences other hardships like reduced access to credit.


Using credit-reporting data for a large sample of individuals, the NBER compared individuals living in Medicaid expansion states with individuals that live in states that have not expanded Medicaid. The study relied on Federal Reserve Bank of New York Consumer Credit Panel/Equifax (CCP) data to measure financial outcomes of individuals in the population between the ages of 19-64. The study used data from 2010 through 2015—four years of pre-Medicaid-expansion data and two years of post-expansion data. Demographic information was acquired based upon zip code data.


The study found that Medicaid expansion significantly reduced the amount of debt in third-party collections among those individuals that live in zip codes containing the most poor and uninsured individuals. The study primarily looked at individuals earning less than $16,000 a year. The NBER estimated that reductions in collection amounts in 2014 were between $51 and $85. The overall impact of debt reduction fell between $600 and $1000. Although the impact is positive, it is not complete in terms of health care related debt or hardship elimination. A Kaiser Family Foundation survey identified that, even with the passage of the ACA, one in five Americans still struggle to pay their medical bills.

Other impacts

Medical debt and its impact on financial security is an important measure of success for the ACA. The significance stems in part from the fact that the impacts of Medical debt go beyond health. Medical debt can force people to rely on savings, cut back on other necessities (including other health care expenditures), and fall behind on other payments (car, rent, etc.), any and all of which can put employment at jeopardy. Medical debt is often both a symptom of and a factor leading towards other financial hardships.  The ACA’s positive impact at reducing those hardships is, at least for those with medical debt, a good sign. Additionally, the reduction of medical debt is yet another reason for non-expansion states to consider expansion of their Medicaid programs.

Highlight on North Dakota: three priorities highlight health needs assessment

Although numbers indicate that by the end of March 2016, more than 20,000 North Dakotans had signed up for private insurance or renewed their coverage on the marketplace under the Patient Protection and Affordable Care Act (ACA) (P.L. 111-148), local public health officials still had plenty of residents’ health needs to address. Access to affordable care, chronic disease, and obesity/poor nutrition/lack of exercise were three health concerns identified as priorities in the Bismarck-Burleigh Public Health (BBPH) agency’s strategic implementation plan for 2016 through 2018, issued April 12, 2016.

A previously completed survey in 2012 had identified five areas of concern: pediatric obesity, child poverty, binge drinking, substance abuse, and affordable housing. These key concerns served as a guide for public health efforts in Bismarck at that time.

Needs assessment. In 2015, BBPH partnered with local hospitals CHI St. Alexius Health and Sanford Health in Bismarck, North Dakota, to complete a community health needs assessment with online and paper surveys. As a result, the community health needs assessment identified and ranked the top 10 concerns for Bismarck in 2015: lack of affordable housing, chronic disease, access to affordable health care, obesity, access to mental health services, child abuse, homelessness, coordination of care between health care providers and services, drug use, and stress.

Priorities and strategy. In turn, BBPH chose access to affordable health care, chronic disease, and obesity as its priorities for 2016 through 2018. In order to improve access to affordable health care, BBPH noted that it would conduct outreach and educational activities to promote access to affordable health care opportunities for minorities, underserved, and vulnerable populations. As for addressing chronic disease, BBPH also stressed that it would educate individuals to be more active in health care choices. Finally, in order to address obesity, poor nutrition, and the lack of exercise, BBPH made it a priority to support healthy behaviors at work.

Shifting biosimilar costs away from Part D beneficiaries

Biosimilars are expected to be priced lower than existing biologics, and therefore reduce costs for consumers and payers. Because of Medicare Part D policies, however, beneficiaries may actually pay more out-of-pocket for the biosimilar than the higher-cost, innovator reference biologic. This may discourage use of biosimilars, reducing overall savings to the Part D program. Avalere Health has studied this issue and released a report suggesting two ways to reduce patient costs for biosimilars: (1) requiring manufacturer discounts for biosimilars, consistent with current law for branded drugs; and (2) creating a biosimilar tier that would reduce beneficiary costs for the biosimilar to the same level as the reference product.


The Biologics Price Competition and Innovation Act (BPCIA), enacted as Title VII of the Patient Protection and Affordable Care Act (ACA) (P.L. 111-148), created a “biosimilar pathway” for the FDA to approve both biosimilars and interchangeable biologics. Section 7002 of the ACA sets forth the approval pathway for these biosimilar biological products.

Because of the high cost sharing to Medicare Part D beneficiaries in the coverage gap (donut hole), section 3301 of the ACA included a provision to begin closing the gap by gradually reducing beneficiary cost-sharing to 25 percent by 2020. Beneficiaries reach the coverage gap once they incur a certain amount of total drug spending. In 2016, the coverage gap begins after a beneficiary has incurred $3,310 in total drug costs. While in the coverage gap, the beneficiary pays 100 percent of their prescription drug costs until they reach the catastrophic coverage limit of $4,850. Once a beneficiary reaches the catastrophic coverage limit, they pay $2.95 for a generic drug and $7.40 for brand name drug or 5 percent of the cost of the drug, whichever is greater.

Another part of the effort to reduce cost sharing in the coverage gap is the Coverage Gap Discount Program (CGDP), which requires manufacturers to provide a 50 percent discount on brand drugs dispensed during the coverage gap. Both the manufacturer’s 50 percent discount and the beneficiary’s out-of-pocket costs count toward true out-of-pocket costs (TrOOP). Once the beneficiary reaches the TrOOP cost of $4,850 in 2016, he or she enters the catastrophic phase and exits the coverage gap.

The CGDP, however, does not apply to generic drugs or biosimilars in the coverage gap. Therefore, in 2016, Part D beneficiaries are responsible for 58 percent of costs associated with generic and biosimilar medications in the coverage gap and the Part D plan is responsible for all remaining spending in the gap. And because there are no other stakeholders contributing to the TrOOP of the Part D beneficiary, this can lead to patients paying more for a biosimilar product than for the innovator biologic product.

Avalere study

The Avalere study illustrated the cost sharing differences between a reference product and its biosimilar by comparing a Part D beneficiary that takes an innovator biologic medication with another beneficiary taking the biosimilar. The study assumed that the Part D innovator biologic had an annual treatment cost of $30,000 and the biosimilar was discounted by 25 percent. The Avalere study found that a Part D beneficiary will pay approximately $1,536 more per year in out-of-pocket costs for the lower-cost biosimilar product than for the reference product.

Policy options

To avoid this Part D cost-sharing problem for biosimilars, Avalere suggests two policy options, both of which would require legislation:

  • Create a biosimilar coverage gap discount: Changing the statutory language to direct biosimilar manufacturers to pay 50 percent of drug costs in the coverage gap would result in lower out-of-pocket costs for patients, as well as additional savings to the federal government. The additional manufacturer contribution would also count towards beneficiaries’ TrOOP threshold, allowing beneficiaries to reach the catastrophic phase more quickly. With the additional contribution from biosimilar manufacturers, the program costs in the coverage gap would also be reduced.
  • Create a biosimilar tier: Although biosimilars are generally less expensive than innovator biologics, Avalere believes that they will usually be subject to the same cost sharing applied to innovator products on the specialty tier. If Part D plans were required to create a “biosimilar tier,” that would lower patient cost-sharing for a biosimilar because the total out-of-pocket costs would not exceed those for the reference product. This would result in the Part D benefit paying more to cover the lower cost sharing associated with a “biosimilar tier.”


According to Avalere, both policy options would result in savings to patients and overall savings to the Part D system. Under the first policy, requiring manufacturers to pay coverage gap discounts for biosimilars would shift the costs away from the government, patients, and health plans to manufacturers. Under the second policy, creating a separate biosimilar tier would shift costs to health plans and the federal government, as patient cost sharing would be reduced.

Covered California board supports innovation waiver, health insurance for the undocumented

The Board of Covered California, the state’s health insurance marketplace, has expressed support for an Innovation Waiver that would allow the state to offer non-qualified health plan (non-QHP) insurance coverage to certain undocumented adult immigrants via the exchange. Before the state could apply for such a waiver under section 1332 of the Patient Protection and Affordable Care Act (ACA) (P.L. 111-148), it would have to pass legislation enacting waiver authority; Senate Bill 10 (SB 10) is currently pending in the General Assembly, but faces opposition. The Board supported a phased approach that would allow the state to target one or two proposals in 2016, including the extension of non-QHPs to undocumented immigrants, but allow it to phase in other innovations over time.

ACA section 1332 permits states to request a state innovation waiver of certain ACA requirements for plan years beginning on or after January 1, 2017. Applications must include a comprehensive description of the waiver plan, along with a 10-year budget, and must allow for a public notice and a comment period that permits a “meaningful level of public input.” After such a period, the Covered California Board determined that a waiver would ultimately further the exchange’s mission of providing health insurance coverage and would simplify application procedures for California families.


Section 1411 of the ACA limits participation in the health insurance marketplace to citizens, nationals, and lawful permanent residents of the United States, thereby excluding the undocumented from participation. The 1332 proposal would allow undocumented immigrants to purchase health insurance via Covered California, with the caveats that they could only purchase non-QHPs and would not be eligible for premium breaks or cost subsidies. The Board believed that the proposal would allow “mixed families” with members with legal and non-legal status to purchase insurance for their entire family via the marketplace, simplifying the shopping ad enrollment experience. The Board recognized, however, that such a plan might not be approved by federal officials and that, if approved, it could cause confusion in mixed families regarding subsidy eligibility.

The Board also discussed other proposals, including:

  • allowing dependents and spouses to receive advance premium tax credits if employer-sponsored dependent coverage is not affordable;
  • offering non-QHP standalone adult vision and dental plans via the marketplace;
  • offering vision and dental benefits as essential health benefits;
  • offering Medi-Cal plans via the exchange and waiving certain requirements; and
  • offering copper plans with actuarial values of only 50 percent for consumers with income above 400 percent of the federal poverty level (FPL).

Given the debate over immigration in the United States, Covered California Chair noted that the move may be “somewhat symbolic,” but noted that “symbolism is important.”