The Affordable Care Act (ACA) will increase coverage through the expansion of Medicaid and the creation of a Health Insurance Exchange with subsidies. RAND researchers analyzed the ACA’s economic impact on the state of Arkansas and found that by 2016, about 400,000 people will be newly insured, net federal payments to the state will amount to $430 million annually, and the total gross domestic product will see a net increase of $550 million.

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The Economic Impact of the Affordable Care Act on Arkansas

by Carter C. Price, Evan Saltzman

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Research Questions

  1. What are the coverage and spending impacts of the Affordable Care Act on Arkansas?
  2. What are the broader economic effects of the changes in spending?

The Affordable Care Act (ACA) will increase coverage through the expansion of Medicaid and the creation of a Health Insurance Exchange with subsidies. RAND researchers analyzed the ACA’s economic impact on the state of Arkansas and found that by 2016, about 400,000 people will be newly insured, net federal payments to the state will amount to $430 million annually, and the total gross domestic product will see a net increase of $550 million.

Key Findings

Coverage Will Increase

  • Under the law, the number of nonelderly people with health insurance could reach nearly 2.3 million, compared with 1.9 million otherwise. Approximately 190,000 of the additional 400,000 people with insurance will be on Medicaid and the remaining growth in coverage will be in the nongroup market through health care exchanges. There is little net change in employer-sponsored coverage.

Arkansas Will See Inflow of Federal Dollars

  • Because Arkansas is relatively poor, there will be a net flow of money into the state, as increased federal spending on subsidies and Medicaid for the poor outweigh decreased Medicare spending and increases in taxes and fees. The net effect is predicted to be an increase of roughly $430 million.
  • Because of the multiplier effect of this net increase in federal spending, the total impact on the state's GDP will be a gain of around $550 million, and about 6,200 jobs would be created.
  • Based on the increased enrollment and spending distributions for Arkansas, the state could see a decrease of about $67 million dollars in uncompensated spending costs in 2016.

The research described in this report was sponsored by the Arkansas Center for Health Improvement and was conducted within RAND Health, a division of the RAND Corporation.

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