The health care ‘iron triangle’ and the Patient Protection and Affordable Care Act

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Health care economists have long understood that the Patient Protection and Affordable Care Act (PPACA) could never function as intended. The reasoning behind this bold statement is simple. The PPACA aspires toward an end point that no law, system, or intervention has been able to accomplish: breaking the health care “iron triangle.”

According to the concept of the health care iron triangle, health care is a tightly interlocked, self-reinforcing system of three vertices—access, quality, and cost—and improvement in two vertices necessarily results in a worsening in the third.1 Interventions in health care inherently require trade-offs, which prevent simultaneous improvement in all three components.

The PPACA is explicitly designed to disrupt this paradox, ambitiously aiming to increase access and improve quality while lowering costs.2 Emerging evidence suggests, however, that the practical implementation of the PPACA will trump its intended benefits. Though there are numerous ways in which the PPACA could paradoxically decrease access to care, lower the quality of care, or raise costs, the outcome is almost certain that the PPACA may bend—but will never break—the health care iron triangle.


The PPACA seeks to increase health care access through four mechanisms: mandating that virtually all Americans obtain health insurance or pay a tax; expanding Medicaid to individuals earning less than 138% of the federal poverty level; requiring employers who have 50 or more employees to provide adequate health insurance or pay a fine; and preventing insurers from denying coverage based on preexisting medical conditions.3 Of these initiatives, only preexisting coverage requirements are a guaranteed outcome of the PPACA’s efforts to improve access.

There is no way to increase access, improve quality, and decrease costs at the same time

Young adults are historically underinsured, for several reasons: they are generally in good health, tolerate greater risk, have higher unemployment levels, and are less likely to be able to afford insurance on an open market.4 With the threat of being denied insurance on the basis of preexisting conditions eliminated, this demographic may elect to pay a penalty and forgo insurance until it is needed. This not only decreases the number of insured Americans, but also deprives insurers of low-cost consumers that subsidize higher users, thus raising premiums and forcing participants out of private markets.

In 2012, the US Supreme Court largely upheld the PPACA, except that states retain jurisdiction over the decision to expand Medicaid. Nearly half of the states will keep their Medicaid programs as they are, for reasons ranging from financial (states bear 10% of the cost of this new population beginning in 2020) to ideological (partisan dislike of the PPACA).5 Irrespective of the rationale for nonexpansion, millions of Americans will not have access to Medicaid as written in the PPACA.

Employers, mindful of the expenses they face as a result of the law, may shield their financial liabilities as health insurance providers. At present, approximately half of all Americans obtain insurance through an employer, though that proportion could diminish if employers reorganize their businesses to avoid PPACA requirements.6 For example, businesses with fewer than 50 employees are exempt from offering insurance and could restrict payroll size to 49 employees or fewer to avoid the $2,000 penalty. Since the employer mandate of the PPACA only applies to full-time employees—defined as those working at least 30 hours a week—larger employers may switch hiring patterns toward more part-time employees. The nonpartisan Congressional Budget Office (CBO) recognizes this phenomenon and projects that the number of total hours worked in the United States will decline between 1.5% and 2% through 2024 as a result of PPACA implementation. Ultimately, the decline in full-time employment resulting from the PPACA will lead to “some people not being employed at all and other people working fewer hours” and will disproportionately impact “lower-wage workers.”7

The CBO analysis predicts that the equivalent of 2 to 2.5 million full-time jobs will be lost as a result of the PPACA’s implementation over the next 10 years. Employers and employees responding to financial disincentives perpetuate a cycle in which increased rates of unemployment and underemployment lead not only to fewer insured Americans, but also to fewer Americans insured by their employers.8

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