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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

what is meant by broadening the tax base?
Fiona Reply
What is scarcity.
Npoanlarb Reply
when there is adequate resources
the represent inadequacy of resources relative to the needs of individuals
why our wants are limited
Npoanlarb Reply
nooo want is unlimited but resources are limited
and do to that there occurs scarcity and we have to make choice in order to have what we need if need be I will explain more
our wants are not limited but rather the resources
as we know that there are two principle of microeconomics scarcity of resources and they have alternative uses...
yes .....
because our resources are limited./we have a limited resources.
what is demand
Thank Reply
demand is something wt we called in economic theory of demand it simply means if price of product is increase then demand of product will decrease
inverse relationship between demand and price
in microeconomic
demand is what and how much you want and what's your need...
how can one be so with economics even while you have less knowledge in mathematics.
why is it that some products increases everyday by day
Chiamaka Reply
because demand is increase
because demand is increase
but how demand increases?
Because of the Marketing and purchasing power of people.
but how could we know that people's demands have increased everyday by day and how could we know that this is time to produced the products in the market. Is any connection among them
for normal good people demand remain the same if price of product will increase or not
see that some product which increases day by day is comes under normal good which is used by consumer
Seems hot discussing going here
If there are less products demand starts to increase for those products
Economics is really interesting to learn ....
see there is Inferior goods ands normal goods inferior good demand is rarely increase whereas as we talk about normal good demand will absolutely Increase whether price is increase or not
and demand for normal goods increase cause people's income as a while increases time to time
and it might also be that the cost of raw materials are high.
may be
obviously because demand is increasing.....and price is getting low.....
hmmm there is inverse relationship between demand and price
This is because the supply of those products in relation to raw materials are decreasing and they are also necessities. This crate shortage in the market, so sellers will rise the prices of those products.
Importance of economics
Odunayomi Reply
the nature and significance of economics studies
What is demand
Shuaib Reply
deman is amount of goods and services a consumer is willing and able to buy or purchase at a given price.
the willingness and ability of a body to purchase goods nd servicesbis called demand ,so if she/has ability but doesn't have willingness it's not a demand same if she or he has willingness but doesn't has ability it's not a demand too
Demand refers to as quantities of a goods and services in which consumers are willing and able to purchase at a given period of time and demand can also be defined as the desire or willingness and backed by the ability to pay.
What is Choice
Choice refers to the ability of a consumer or producer to decide which good, service or resource to purchase or provide from a range of possible options. Being free to chose is regarded as a fundamental indicator of economic well being and development.
choice is a act of selecting or choosing from the numerous or plenty wants.
demand is want and it is also what you need and able to afford a particular period of time... because demand changes with time.
Demand refers to the ability of the consumer to pay for a particular product at a given price
how does consumer make profit
Clifford Reply
by buying goods in bulk.
Compare and contract the function of commercial bank and the central bank of Nigeria
Akwi Reply
what do think is the difference between overhead costs and prime cost
what is economics
Mohamed Reply
economics is a social science that study's how resources can be used to produce goods and services for society
Economic is a science which studies human behavior as a relationship between ends and scares means which have alternatives uses or purposes.
what is economics
Mohamed Reply
what is the basic economic problem
John Reply
unlimited wants vs limited resources
what economics is all about?
Nomuhle Reply
what is a new paradigm shift
Austen Reply
Paradigm shift it is the reconcilliation of fedural goods in production
fedural? what is that?

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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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