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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 the meaning of function in economics
Effah Reply
Pls, I need more explanation on price Elasticity of Supply
Isaac Reply
Is the degree to the degree of responsiveness of a change in quantity supplied of goods to a change in price
Discuss the short-term and long-term balance positions of the firm in the monopoly market?
Rabindranath Reply
how are you?
can you tell how can i economics honurs(BSC) in reputed college?
through hard study and performing well than expected from you
what should i prepare for it?
prepare first, in psychologically as well as potentially to sacrifice what's expected from you, when I say this I mean that you have to be ready, for every thing and to accept failure as a good and you need to change them to potential for achievement of ur goals
parna kya hai behencho?
Hello, dear what's up?
good morning
pls, is anyone here from Ghana?
Hw s every one please
Ys please I'm in Ghana
what is firms
Anteyi Reply
A firm is a business entity which engages in the production of goods and aimed at making profit.
What is autarky in Economics.
what is choice
Tia Reply
So how is the perfect competition different from others
Rev Reply
what is choice
please what type of commodity is 1.Beaf 2.Suagr 3.Bread
Alfred Reply
what is the difference between short run and long run?
Ukpen Reply
It just depends on how far you would like to run!!!🤣🤣🤣
meaning? You guys need not to be playing here; if you don't know a question, leave it for he that knows.
pls is question from which subject or which course
Is this not economics?
This place is meant to be for serious educational matters n not playing ground so pls let's make it a serious place.
Is there an economics expert here?
Okay and I was being serous
The short run is a period of time in which the quantity of at least one inputs is fixed...
that is the answer that I found online and in my text book
Meaning of economics
Suraj Reply
It will creates rooms for an effective demands.
Chinedum Reply
different between production and supply
What is the economic?
Economics is a science which study human behavior as a relationship between ends and scarce means which has an alternative use.
what is supply
what is different between demand and supply
Debless Reply
Demand refers to the quantity of products that consumers are willing to purchase at various prices per time while Supply has to do with the quantity of products suppliers are willing to supply at various prices per time. find the difference in between
Please what are the effects of rationing Effect of black market Effects of hoarding
Atty Reply
monoply is amarket structure charecrized by asingle seller and produce a unique product in the market
Cali Reply
I want to know wen does the demand curve shift to the right
demand curve shifts to the right when there's an increase in price of a substitute or increase in income
ask me anything in economics, I promise to try and do justice to the question, you can send me an email or message, I will answer
what are the factor that change the curve right
explain the law of supply in simple .....
the Law of supply: states that all factor being equal, when the price of a particular goods increase the supply will also increase, as it decreases the supply will also decrease
@Nana the factor that changes or shift the d demand curve to the right is 1) the increase in price of a substitute good or commodity 2) increase in income
you can send your questions I am Comr. Kin chukwuebuka
different between bill of exchange n treasure bill
so would you tell me what means an apportunity cost plz?
what is true cost
your question isn't correct naadi
define an apportunity cost?
orukpe ,is my question whats wrong or u dont know anything?
In a simple term, it is an Alternative foregone.
opportunity cost is the next best value of a scale of preference
Both of you are not correct.
opportunity cost: is a forgone alternative
Monopoly is where is one producer produces a given product with no close substitute
what is income effect?
Qwecou Reply
if you borrow $5000 to buy a car at 12 percent compounded monthly to be repaid over the next 4 year what is monthly payment
Nitish 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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