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Economist Ellen Magenheim Cites Benefits of New Health Care Law

On Oct. 1, health insurance exchanges became available to the American public, marking a major step in the implementation of the Affordable Care Act (ACA).

According to Professor of Economics and Department Chair Ellen Magenheim, the ACA will not solve all of the nation's health care issues, but it is a clear step in the right direction and should provide significant benefits to individuals and to the American economy.

"A segment of the population that has been unable to access health care or has only been able to access it through emergency rooms will now be able to see a doctor, so we would expect to see a healthier and more productive society," says Magenheim, who specializes in health economics.

In a recent interview with the Delaware County Daily Times, Magenheim discussed the ACA's economic impact.

"When you have higher levels of health, you expect to have more productivity in the workplace and more people working and paying taxes," she said.

Along with increased productivity, Magenheim believes the new health care system will provide numerous additional benefits to the American economy. One benefit is that the new system should reduce "job lock," which occurs when workers stay in jobs because they fear they will be unable to get affordable health insurance through the individual market.  

"Now such individuals may be able to buy insurance through the exchanges," she says, "and may even be eligible for subsidies, which many analysts predict could lead to more self-employment and the creation of more new businesses."

Additionally, Magenheim believes the new health care system will provide individuals with some incentive to live healthier lives. Under ACA, insurers cannot refuse insurance or charge higher premiums to individuals with pre-existing conditions; they can, however, charge higher premiums to smokers.

"Ultimately, people don't want health insurance ­- they want health," she says. "While better health care is important, we have to look at individuals and their own health behaviors and I think this is a significant step."

She also predicts that several of the concerns raised in discussions of the ACA - notably overcrowding of medical services by the newly-insured and the cost to all American taxpayers ­- are misunderstood or overstated.

"Experience has suggested not everyone newly, fully insured (due to the ACA) will immediately increase their health care consumption," she says. "This is partially because many of the newly insured are young and healthy, while others were already getting some health care through emergency rooms and clinics." She also notes that the ACA will be funded through changes in Medicare reimbursements for doctors, increased taxes on the supply side of medical care, and through a tax on investment income.

Similarly, Magenheim says that the initial glitches with the Health Insurance Marketplace website may be irritating, but should not be viewed as condemnation of the entire system.

"Problems like these are likely to happen with any new system; part of the problem was that they had higher demand then they anticipated," she says. "This high demand is a good thing. Transitions are always difficult and the sign-up problems are already being worked out."

While a proponent of the ACA, Magenheim notes that there are still several areas of the American health care system that need improvement.

"While this is progress, we still have the problem that we spend more per person and get inferior outcomes to those in many other countries," she says. "We need to figure out ways to reduce some of the unproductive spending to make sure that we're using health care dollars well."

Magenheim joined Swarthmore in 1986 teaches courses in microeconomics, health economics, behavioral economics, and the economics of industrial organization and antitrust. Her current research focuses on applying insights from behavioral economics to improve outcomes in health and financial behavior. She also studies the role of health care labor in determining health care outcomes and costs.  

UPDATE: Magenheim was recently interviewed by on the economic impact of the Affordable Care Act. The two-part interview deals with the health care reform's effect on the economy and its rocky rollout.

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