<< Chapter < Page Chapter >> Page >

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 demand
KING Reply
what is demand and supply
Lansana Reply
what is liquidity
the ability to easily turn asset or investment to cash
liquidity is refers to the ease with which an asset or security, can be converted into ready cash without affecting it's market price. example is milk and checking a account in the bank.
the meaning PPP is public _private partnership and PPP in economic is purchasing power_parity.
what is economy production
Miracle Reply
what is Monopoly
what is monopoly
Aina Reply
what is the full meaning of gpa?
Eedris Reply
why the firm will be happy to make normal profit?
Anold Reply
1.to make further increase 2.to established the firm 3. to draw and attract more customers 4. to foresee the future of the firm. 5. to get goods in galore
when marginal utility is zero? what is the total utility?
Scott Reply
definition of choice?
Anick Reply
it refers to the act of selecting one alternative from the other
State and explain three advantages and two disadvantages of capitalist economic system
Ghislain Reply
What is cross elasticity of demand
Justice Reply
Is a demand in which the of goods change over time.
How can I join
join what?
it measure the extend in which the quantity demanded of a good respond to change in price of other good.
refers to sensitivity of quantity demanded in change of price of commodity
meaning of PPP
What is balance of payments
Bah Reply
what are free good
Maillot Reply
how do you determine price change
Matri Reply
what is economics?
Yaya Reply

Get the best Principles of economics course in your pocket!

Source:  OpenStax, Principles of economics. OpenStax CNX. Sep 19, 2014 Download for free at http://legacy.cnx.org/content/col11613/1.11
Google Play and the Google Play logo are trademarks of Google Inc.

Notification Switch

Would you like to follow the 'Principles of economics' conversation and receive update notifications?