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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

there's a picture of a bread being bought and the consumer got sick after eating it. the question was "identify the type of fallacy referred to the article
Jay Reply
what is indifference curve
egbebiyi Reply
what is utility
Labiba Reply
utility is the satisfaction derived from consuming a particular product.
taiwo
utility is the satisfaction a consumer derives from consuming a particular good
Chinenye
you are right
Ishaq
nice one chi
taiwo
you are right
Adebayo
thank you 🙏
Labiba
thanks
Chinenye
hello
Mustapha
you are right
Nak
Demand refers to the various quantities of a commodity a consumer is willing and able to purchase at particular price with a period of time.
Clifford Reply
perfect
Labiba
Demand is refer to as the quantity of goods and services which a consumer is willing and able to buy at a particular point in time and at a given price.
taiwo
What is demand
Magdalene Reply
What is divided
Alfusainey Reply
It help us to no how to do with our money
Alfusainey
Demand curve us a graph showing the relationship between the price and quantity of a commoditiy demand
Alfusainey
Demand schedule is define as a table showing the relationship between prices and the quantity of that commoditiy demanded
Alfusainey
Demand may be defined as a quantity of good or services that consumers are walling and able to buy at a alternative prices
Alfusainey
The law of demand states that all things being equal the higher the price the lower the quantity that will be demanded vice versa
Alfusainey
The law of supply states that all things being equal the higher the price the higher the quantity of a commoditiy that will be supplied vice versa
Alfusainey
yes
Vinsaint
what is money
Siaw Reply
money is defined as the medium of exchange
jackie
money is anything that serves as a medium of exchange,measure of value and standard for deferred payment
Chinenye
money is legal tender that is use for buying good n service
Nak
Money is anything that has general acceptability as a medium of exchanging dabt
Alfusainey
Money is a legally or socially binding conceptual contract of entitlement to wealth, void of intrinsic value, payable for all debts and taxes, regulated in supply.
Nana
money is accepted material for buying and selling and also for payment of dept
Dora
what is economics
reekado Reply
what is the meaning of term depreciation
Niyogushimwa
I don't know tell me pls
Manuel
decrease in the valaue of currency is called depreciation.
Asit
managing the scarce resources is called economics 😉
Asit
definition of economics according to different scholars
Onesmo Reply
Economics is a science that studies human behavior as a relationship between end and scarce means which have alternative uses:by Davern spot
Dora
am I correct?
Dora
Yeah you tried
Donkiss
reason why we study economics
Moruf Reply
what is economics
Tutu Reply
economics is defined as the science which studies human behavior as a relationship between ends and scarce means which have alternative uses.
Semiat
social science
Maxwell
Economics is a social science which studies human behaviour as a relationship between ends and scarce means which have alternative uses.
Maxwell
Yh ar right
Alfusainey
what is a gross domestic product
Amogelang Reply
Explain what is a production possibility curve
Sharon Reply
A curve that indicates the various production possibilities of two commodities when resources are fixed...
Geoffrey
what is market?
Jasmin Reply
ware the Byers and seller's that please is called market
suresh
a place where buyers and sellers meet
Tariro
I don't like this market definition.
Jasmin
market is any arrangement whereby buyers and sellers are brought together for the purpose of transacting business. It could be a geographical location or any other means such as internet, mobile phone etc. as long as buyers and sellers are brought together for the purpose of exchange.
Agusimba
A market is a place where buyers and sellers buy and sell goods through bargaining.
Jasmin
yes ,you are correct Agusimba sir.
Jasmin
exception of the low of demond
Rohit 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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