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President obama’s health care reform

The picture is a photograph of President Barack Obama giving a speech on healthcare reform.
The Patient Protection and Affordable Care Act has become a controversial topic—one which relates strongly to the topic of this chapter. (Credit: modification of work by Daniel Borman/Flickr Creative Commons)

What’s the big deal with obamacare?

In August 2009, many members of the U.S. Congress used their summer recess to return to their home districts and hold town hall-style meetings to discuss President Obama’s proposed changes to the U.S. healthcare system. This was officially known as the Patient Protection and Affordable Care Act (PPACA) or as the Affordable Care Act (ACA) , but was more popularly known as Obamacare. The bill’s opponents’ claims ranged from the charge that the changes were unconstitutional and would add $750 billion to the deficit, to extreme claims about the inclusion of things like the implantation of microchips and so-called “death panels” that decide which critically-ill patients receive care and which do not.

Why did people react so strongly? After all, the intent of the law is to make healthcare insurance more affordable, to allow more people to get insurance, and to reduce the costs of healthcare. For each year from 2000 to 2011, these costs grew at least double the rate of inflation. In 2014, healthcare spending accounted for around 24% of all federal government spending. In the United States, we spend more for our healthcare than any other high-income nation. Yet in 2015, over 32 million people in the United States, about 13.2%, were without insurance. Even today, however, several years after the Act was signed into law and after it was mostly upheld by the Supreme Court, a 2015 Kaiser Foundation poll found that 43% of likely voters viewed it unfavorably. Why is this?

The debate over the ACA and healthcare reform could take an entire textbook, but what this chapter will do is introduce the basics of insurance and the problems insurance companies face. It is these problems, and how insurance companies respond to them that, in part, explain the ACA.

Introduction to information, risk, and insurance

In this chapter, you will learn about:

  • The Problem of Imperfect Information and Asymmetric Information
  • Insurance and Imperfect Information

Every purchase is based on a belief about the satisfaction that the good or service will provide. In turn, these beliefs are based on the information that the buyer has available. For many products, the information available to the buyer or the seller is imperfect or unclear, which can either make buyers regret past purchases or avoid making future ones.

This chapter discusses how imperfect and asymmetric information affect markets. The first module of the chapter discusses how asymmetric information affects markets for goods, labor, and financial capital. When buyers have less information about the quality of the good (for example, a gemstone) than sellers do, sellers may be tempted to mislead buyers. If a buyer cannot have at least some confidence in the quality of what is being purchased, then he will be reluctant or unwilling to purchase the products. Thus, mechanisms are needed to bridge this information gap, so buyers and sellers can engage in a transaction.

The second module of the chapter discusses insurance markets, which also face similar problems of imperfect information. For example, a car insurance company would prefer to sell insurance only to those who are unlikely to have auto accidents—but it is hard for the firm to identify those perfectly safe drivers. Conversely, buyers of car insurance would like to persuade the auto insurance company that they are safe drivers and should pay only a low price for insurance. If insurance markets cannot find ways to grapple with these problems of imperfect information, then even people who have low or average risks of making claims may not be able to purchase insurance. The chapter on financial markets (markets for stocks and bonds) will show that the problems of imperfect information can be especially poignant. Imperfect information cannot be eliminated, but it can often be managed.

Questions & Answers

what is the difference between demand and supply
Peter Reply
what is the national income
Kamara Reply
oils and resources
Peter
What's current account?
Che Reply
Demand refers to goods and services that the buyer is willing and able to buy at a price over a period of time
Che
Can it be possible to have two level of comparative advantage in a country ?
Louise Reply
.no.its not possible
Asanda
Why ?
Louise
I think no possible
Sadiq
No
Nwanne
why do oligopoly increase on the elastic segment of the demand curve
Tintswalo Reply
what is all about production possibility curve
Nice Reply
help me about the assumption of possibility curve
Nice
-The quantity and quality of economic resources are fixed. -only two types of goods can be produce out of this resources (that is,producer and consumer goods). -Resources are fully utilised. -The resources are mobile. -The state of technology is constant.
Louise
What is utility
chisom Reply
what is the meaning of money and inflation
Tinuke Reply
Money can be define as anything acceptable as a medium of exchange and mean of payment
Cynthia
inflation is when everything seemed to cost so much less
Nwanne
what is a bar chart
Godwin Reply
what's economic
John Reply
Economics can be define as a study of how human beings make decisions in the face of scarcity it can also be define as using one wealth to make more wealth
Cynthia
Or in Nigerian way Economics is a science (social science) which studies human behavior as a relationship between Ends and Scarce which have alternative uses
Cynthia
Economics is the study of how human make decision in the face of scarcity
Nwanne
what is the meaning of imperfect market structure
Hoyindamolah Reply
the theroy of demand
Tinuke
what is market economy
Jusu Reply
Market Economy:Is a system where the laws of supply and those demand direct the production of goods and services.
Iyabo
what is the meaning of money and inflation
Tinuke
what's demand in economics?
Abi Reply
Demand in economic is the good a consumer is willing or able to purchase at a particular time
Hoyindamolah
explanation of graph,bar chart,pie chart with examples
Abdulmojeed
4. Assume, after completing your economics class, you explain your friend that about 65% of GDP is spending on consumption. Your friend tells you that people are greedy and it is better for GDP if they spend on services or experiences. What would be your answer to your friend?
Javohir Reply
What is power
Ahmad 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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