Introduction
Obama Care aims at extending health care services to all the U.S. citizens, but it impacts the economy positively and negatively. The Affordable Care Act requires that firms should compensate the medical insurance cover of their full-time employees. The specific aspects of the economy that are impacted by this provision include employment, supply, and demand, trickledown economics, GDP, fiscal policy, wage and health care inflation. While Obama care forces firms to hire employees on part time, it results in high demand for medical professionals. As large companies and high-income earners pay their insurance premiums, the trickledown economics becomes real. The funds are used to subsidize health services for poor people. However, the act may lead to a decline in the GDP growth since people are unwilling to invest when the cost of production is high. This paper explores the impacts of Obama care on the economy ( Blahous, n.p).
Unemployment
Obama care impacts unemployment both positively and adversely since it leads to job creation and loss. The act requires companies to offer medical cover for their full-time workers. In response, companies tend to hire part-time employees in a bid to avoid paying health insurance for their workers. This aspect leads to job loss since people have to work for few hours. Various reports indicate that Obama care will continue to reduce the number of working hours in the long term. According to a CBO report (117), from 2017 to 2014 Affordable Health Care will lower the number of working hours by approximately 15% to 20%. Evidently, more people will lose their full-time jobs as businesses adjust to eliminate health care benefits. On the other hand, Obama care leads to the creation of both government and healthcare jobs. According to Bryan (para 9) close to 240,000 jobs were created each year between 2010 and 2014 in the healthcare industry. The act is now creating about half a million jobs annually in the health sector. Also, the provisions of health care coverage by small firms make jobs more attractive. Although small businesses hire employees on a part-time basis to eliminate health insurance benefit, big companies have not changed their hiring process. They are willing to offer health care coverage to their employees, which increase job retention. The act creates the demand for healthcare professionals.
Supply and demand
Obama care impacts the demand and supply of medical products and services significantly. The market for medical services is on the rise while the supply seems stagnant. The trend attributes to the fact that the U.S. has a significant number of healthcare professionals. The ACA focuses on making health care services available to most citizens by subsidizing the cost of insurance (Worstall n.p). In 2014, there were only 8.8 million people who were not insured (Feeney, para 1). Ideally, this tremendous increase in the number of insured people raises the demand for medical services and products. Glied and Ma estimates a 3.8% increase in the number of consultations per week nationally. They further note that the number of visits to outpatient departments may increase by 2.6% nationwide. However, the impact on healthcare supply depends on the frequency of use and the amounts spend on the services and products. The country has a large population of obese people, which leads to overutilization of the health care system. Notably, obesity costs the economy a lot of billions in care each year. Although some economists hold that the supply of medical professionals is stagnant, there are signals that it will increase. Ideally, the existing medical staff should correlate to the current demand.
Trickle down economics
Large business such as oil and manufacturing companies generate a lot of profits which they are not willing to share with their employees. However, through Obama care trickle-down economics is real. The high tax imposed on big business is used to subsidize health care insurance for the low-income earners. Additionally, small firms are given credits at the expense of the large firms. When a small company is unable to meet the employees’ health insurance obligation, it is given a tax break. Further, upper-income families spend less on their essentials as they channel high amounts of money to meet the costly health care premiums.
GDP
There are speculations that the Affordable Care will have an adverse impact on the GDP in the long run. Tim (para 1) holds that the Obama care will reduce the national GDP by 5 percent in the long term. The additional taxation is a burden on employees and the nation at large. High tax lowers economic activities since investors are reluctant to invest due to the high costs of production. Investors cite the increased costs of production when they shift their production process to other countries. The impact of the GDP also depends on how the tax funds are utilized. Currently, the taxes imposed to support Obama care are used to subsidize medical services for the poor people. Notably, the money is not invested in development projects. This fact impacts the GDP growth negatively. As the ACA continues to extend to more people, it means the federal will spend more on the health care industry in a bid to support the program. However, the demand for medical inputs may have a remarkable impact on the GDP. The existing pharmaceutical companies may increase their production services as they strive to meet the growing demand. Increased production of the medical products will result in an increase in the economic activities, which may sustain the economic growth. Nevertheless, this fact depends on number and frequency of the demand for the products. If some primary hospitals eliminate some tests and diagnosis procedures, there will be a little demand and fewer production activities.
Another way through which the Obama care will impact the GPD is through decreased spending. Individuals who earn high and middle income may cut their expenditure significantly as they strive to meet their health care premiums.
Fiscal policy
During its implementation, there were hopes that Obama care would help correct the federal fiscal outlook. The motivating factor of the act was the perceived monetary benefits. Supporters of this health care reform point out that it would fix the federal health care cost inflation. Upon the enactment of the ACA, proponents cited the CBO evaluation that exhibits it would decrease the federal deficits by approximately $124 billion with the 1st decade. The report further notes that the health reform would reduce the deficits by about $1 trillion over the 2nd decade (Blahous n. p.). These perceived fiscal benefits remain the central justifications as to why the reform was enacted. However, deficit reduction might not be ideal due to other economic constraints the U.S. Evidently, since the enactment of the health care reform, it has not had impacts on the fiscal deficits. This fact may be due to the massive debts piled by the Obama’s administration.
Wage
Obama care has significant effects on wages and employment costs. There may be a rise of the minimum salary from the current rate of $10 per hour. In a case of a rise in the minimum wage, the employers who offer health care insurance will have to pay more. This fact would increase the costs of hiring which will force firms to cut wages. Companies that have been impacted by the Obama care have significantly reduced their salaries. Due to the increased costs of hiring, companies tend to cut wages since they have to meet the medical insurance obligations of their employees. Moreover, the costs of health insurance are spread across all employees including the young, childless and aged.
Healthcare inflation
The expenditure on health care grew to 5.3% in 2014, which is the highest rate over the last five years (Mangan, n. p.). He also notes that ACA results in a significant increase in health care inflations. In 2015, health care expenditure represented 17.5% of the GDP, which was slightly higher than in the previous year. The rise in the number of people under the ACA and increased expenditure in drug prescription are the two primary factors that result in the growing healthcare inflation. Prescription of specific drugs such as those targeted to manage cancer and hepatitis C represent a high percentage of this expenditure. The spending on private health insurance has also been on the rise since the implementation of Obama care act. This trend of healthcare inflation may not persist in the long run when all citizens acquire insurance coverage.
Conclusion
Evidently, Obama care has both positive and adverse impacts on the economy. The act affects various real and nominal variables differently. The ACA results to creation and loss of jobs in the country. Both small and large firms tend to cut full-time employment as they strive to eliminate health care insurance benefits. This fact leads to loss of jobs, as individuals have to work on part time basis. Nevertheless, Obama care leads to the creation of employment in the health care sector. While the law increases the demand for medical products and services, the supply seems to be stagnant. The rising demand for medical supplies might results to a greater supply in the long run. Obama care makes the trickle down economics real. Penalties from the large businesses are used to subsidize medical cover for the low-income earners. The GDP may adversely be impacted by the Obama care since investors may be unwilling to invest when the cost of production is high. Further, the ACA is expected to impact the fiscal policy positively in the long run by reducing the deficits (Capretta n.p). However, these perceived benefits are yet to be realized. There has been a reduction in the real income since firms have to meet the insurance obligations. This fact increases the cost of hiring and impacts small business adversely. Lastly, Obama care increases the healthcare inflation. Nevertheless, the steady rise in the costs of medical services and products may not persist in the long run. Conclusively, the adverse impacts of the Obama care on the economy are greater than its benefits.
Works cited
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Capretta, James. Three Shaky Pillars of Obama Fiscal Policy. 2014. Web. 20 July 2016. < http://economics21.org/html/three-shaky-pillars-obama-fiscal-policy-1090.html >
Congressional Budget Office (CBO). Labor Market Effects of the Affordable Care Act: Updated Estimates. 2014. Web. 20 July 2016. < http://www.cbo.gov/sites/default/files/cbofiles/attachments/45010-breakout-AppendixC.pdf>
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Mangan, Dan. “Obamacare, Drugs Spur Higher Health-Care Inflation Rate.” Health Care. CNBC, 12 July 2016. Web. 20 July 2016. < http://www.cnbc.com/2015/12/02/obamacare-drugs-spur-higher-health-care-inflation-rate.html>
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