Has the affordable care act affected health care efficiency?

Abstract

We utilize health care input and output data to evaluate how state-level efficiency in health care has changed in the wake of the Affordable Care Act (ACA). We use a Stochastic Frontier model to estimate annual measures of technical and cost efficiency before, and after, ACA implementation. Results show that following the ACA, states’ technical efficiency scores improved and converged across states. However, cost efficiency scores declined suggesting health outputs rose by a proportionally smaller margin than health care costs. We further investigate efficiency changes for ACA-induced Medicaid expansions. We find Medicaid expansion led to decreased cost efficiency scores, but may have led to increased technical efficiency scores. Overall, results suggest the ACA represents a package of reforms that present a trade-off between technical and cost efficiency.