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The Affordable Care Act (ACA) will be funded through additional taxes to include:

  • Increase the Medicare tax by 0.9 percent and add a 3.8 percent tax on unearned income for high income taxpayers.
  • Charge an annual fee on health insurance providers.
  • Impose other taxes such as a 2.3% tax on manufacturers and importers of certain medical devices.

Many people and politicians have sought to overturn the bill. Those that oppose the bill believe it violates an individual’s right to choose whether to have insurance or not. In 2012, a number of states challenged the law on the basis that the individual mandate provision is unconstitutional. In June of 2012, the U.S. Supreme Court ruled in a 5–4 decision that the individual mandate is actually a tax, so it is constitutional as the federal government has the right to tax the populace.

What’s the big deal with obamacare?

What is it that the Affordable Care Act (ACA) will actually do? To begin with, we should note that it is a massively complex law, with a large number of parts, some of which were implemented immediately, and others that will start every year from 2013 through 2020.

As noted in the chapter, people face ever-increasing healthcare costs in the United States. Those with health insurance demand more health care, pushing up the cost. This is one of the problems the ACA is attempting to fix, in part by introducing regulations designed to control increases in healthcare costs. One example is the regulation that caps the amount healthcare providers can spend on administrative costs. Another is a requirement that healthcare providers switch to electronic medical records (EMRs), which will reduce administrative costs.

Another component of the ACA is the requirement that states establish health insurance exchanges, or markets, where people without health insurance, and businesses that do not provide it for their employees, can shop for different insurance plans. Setting up these exchanges reduces the imperfections in the market for insurance and, by adding to the supply of insurance plans, may lead to lower prices if the supply increases more than demand. Also, people who are uninsured tend to use emergency rooms for treatment—the most expensive form of healthcare. Given that there are over 40 million uninsured citizens in the United States, this has contributed significantly to rising costs. Capping administrative costs, requiring the use of EMRs, and establishing health insurance markets for those currently uninsured, are all components of the ACA that are intended to help control increases in healthcare costs.

Over the years, the ranks of the uninsured in the United States have grown as rising prices, designed to offset the problem of distinguishing the high-risk from the low-risk person, have pushed employers and individuals out of the market. Also, insurance companies have increasingly used pre-existing conditions to determine if someone is high risk, and thus they either charge prices based on average costs, or they choose not to insure these groups. This has also contributed to the over 32 million uninsured. The ACA addresses this problem by providing that people with preexisting conditions cannot be denied health insurance.

This presents another selection problem because those with pre-existing conditions are a high-risk group. Taken as a separate group, the law of insurance says they should pay higher prices for insurance. Since they cannot be singled out, prices go up for everyone, and low-risk people leave the group. As the high-risk group gets sicker and more risky, prices go up again, and still more people leave the group, creating an upward spiral in prices. To offset this selection problem, the ACA includes an employer and individual mandate requirement. All businesses and individuals must purchase health insurance.

At the time of this writing, the actual impact of the Patient Protection and Affordable Care Act is still unknown. Due to political opposition and some difficulties with meeting deadlines, several parts of the law have been delayed, and it will be some time before economists are able to collect enough data to determine whether the law has, in fact, increased coverage and lowered costs as was its intent.

Questions & Answers

using the graph illustrate all the types of elascity
Umar Reply
distinguish between increase in demand curve and extenaion in demamd curve
Farhan Reply
what are the shapes of an indifference curve?
Ovensi Reply
division of labour is simply the breaking of job functions so that each individual is engage to one set or the other for easy delivery
What is division of labor
peter Reply
it is also simply the breaking down of work into various part so that each individual is entitle to one for easy delivery
it is the simplifying of tasks into smaller easily workable divisions where each person specialises on what they understand better
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what are the sources of monopoly power?
Winnerman Reply
the first source, are informations
political power and influence in monetary institutions
what is imperfect competition ?
SHAH Reply
the situation in which elements of monopoly ( R&D, EOS and stability of prices etc.) allow individual producers or consumers to exercise some control over market prices
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Sowmya Reply
where p is less than avc
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olaleye Reply
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Micro-economics refers to the branch of economics which deals with smaller unit or element of the economy.
or Is the study of individual economic unit in a economy..
micro economis is the studay of how Households and firms make decision and they interecr it.
what is financial intermediaries?
Imran Reply
financial intermediaries are those who are link between borrowers and lenders for.eg bank... Bank is a financial intermediary
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والله العظيم انا ماعاوز اتعلمها
انا باخدها غصب عني في الكليه حضرتك
لس كدااا
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what is the law of dimis
Toyin Reply
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what is the demand for commodity that posses identical utilities called
law of diminishing utility...as the quantity consumed of a commodity increases,the utility derived from each successive unit goes on decreasing... condition___ consumption of other commodities remaining the same.
sorry it's...Law of diminishing marginal utility
demand for commodities that posses identical utilities? The commodities having identical utilities are perfect substitutes...and the demand for such type of commodities is called "Competitive Demand".
Why many people can't differentiate Economists and financial analysts
what is the function of the central bank in an economic?
the central bank may lend some money to banks if necessary
what economics
Toyin Reply
Is this a question?
is the study of how societies allocate and manage their scare resources
What is populatiin
Azer Reply
Population is a number of people living in a particular area within a particular time
Population is the number of people living in a particular geographical area within a particular time
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what is demand schedule
Toyin Reply
is a tabular representation of the quantity demanded of a particular product at a particular price over a given period of time
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What is Monetary Mass
Acha Reply

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Source:  OpenStax, Principles of economics. OpenStax CNX. Sep 19, 2014 Download for free at http://legacy.cnx.org/content/col11613/1.11
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