Health care spending projected to decline $11.4 billion if ARPA tax credits expire

A study by the Robert Woods Johnson Foundation is projecting that health care spending is expected to decline by $11.4 billion if the American Rescue Plan tax credits are allowed to expire.

The ARP Act extended eligibility to people with incomes above 400 percent of the federal poverty level, and as a result, marketplace enrollment reached a record high during the 2022 open enrollment period. These credits will expire at the end of 2022 without Congressional action. The foundation study estimates that 3.1 million more people would be uninsured in 2023, and marketplace enrollees would spend hundreds more per person on premiums.

The study projects decreases of $3.8 billion on hospital services, $1.3 billion on services in physician practices, $3.4 billion on other health services, and $2.8 billion on prescription drugs.

“Not only would health care provider revenue be lower, but more than three million people would become uninsured, receive less health care, and likely experience greater morbidity and financial insecurity,” the study states.

Five states would see particularly large declines in health care spending: Florida, Georgia, North Carolina, South Carolina, and Texas. In an earlier report by the foundation, it showed that these states would also experience the greatest losses in coverage if the tax credits expire.

In Texas, hospital spending would decline by $1 billion and total health care spending would decline by $2.7 billion, according to the report. California, Massachusetts, New York, and Vermont, which had state programs providing enhanced tax credits or cost-sharing reductions before the ARP, would see virtually no change in health care spending because those programs would remain in place even if federal enhanced tax credits were allowed to expire.