Introduction
In March 23, 2010, the US Federal Government implemented the Patient Protection and Affordable Care Act (PPACA) also known as “Obamacare”. This law, signed by President Barack Obama overhauls the US healthcare system, which was formalized in 1965 through the establishment of Medicare and Medicaid. This law’s objectives are to decrease the number of uninsured Americans and reduce the cost of health care, through a series of mandates, subsidies, tax credits and other mechanisms that will increase the number of insured Americans and make the delivery of healthcare more efficient thus reducing costs.
This bold law is currently being criticised by detractors of the Obama Administration as regressive in that it fosters dependency on the federal state, it espouses larger budgetary requirements for healthcare and stifles the ability of the health care industry to be innovative and responsive. Late last year, the Associated Press (2012) reported that the law was being threatened to be repealed last November 2012 and that:
“ President Barack Obama’s health care law now appears on track in close to half the states, with others playing catch-up and the administration readying a fallback for states not wishing to participate. Friday was the original deadline for states to notify Washington if they would play a role in building new health insurance markets through which the uninsured can get coverage starting in 2014. Though the administration granted a month’s extension, most states have already made their intentions known.
As of Friday, 23 states plus Washington, D.C., were proceeding; 15 said they’d defer to the federal government to run their markets and 12 were still mulling over their options. The mostly blue group proceeding included five Republican-led states. The undecided included several states that seemed to be moving toward an active role.”
The reason for the flip-flop support for the Obamacare law is something that confounds a lot of analysts. One of them, Ricardo Alonso-Zaldiva of the Huffinton Post (2012) writes that:
“Nearly 6 million Americans – significantly more than first estimated_ will face a tax penalty under President Barack Obama's health overhaul for not getting insurance, congressional analysts said Wednesday. Most would be in the middle class.”
The law as we know it today has not been repealed but almost three years after the Obamacare was passed into law the question of Americans receiving better healthcare is still debatable. Hawyward (2012) writes that:
“The election is behind us now, and President Obama won, but the state rebellion against ObamaCare has only grown stronger. On Friday two more states, Wisconsin and Ohio, announced that they would not create their exchanges. Most of the resisters and hold-outs have Republican governors, although in Missouri the Democrat governor, Jay Nixon, was obliged to pass on creating the exchange by referendum.”
This paper seeks to develop an intelligent opinion of the law and determine the factors that are critical in determining the success or failure of the law. To address this topic, several online resources are available including those of relevant government agencies, online publications, scholarly articles and expert analyses. Data from these sources shall be compiled and analysed based on their pertinence and relevance to modern economic theories that have been utilized as bases for the development of the Patient Protection and Affordable Care Act of 2010.
Relevant Findings
The objective of this study is to present a recent health policy in the United States, identify intended consequences and determine two (2) potential unintended consequences. This study must recognize if the intended consequences and unintended consequences had occurred and must evaluate the policy’s impact based on the intended and the unintended consequences. The presented information below seeks to fulfil these objectives.
The US healthcare system needs to be reformed. In 2012, Chris Connover of Forbes wrote that:
“the U.S. health system needed reform was never in doubt. However, that government-run health care was the answer was never in doubt only in the minds of progressives. And there is no doubt that Obamacare puts us firmly on the path towards government-run health care.”
In March 23, 2010, the US Federal Government implemented the Patient Protection and Affordable Care Act (PPACA) also known as “Obamacare”. This law, signed by President Barack Obama overhauls the US healthcare system, which was formalized in 1965 through the establishment of Medicare and Medicaid.
Obamacare’s objectives are simple. It aims to decrease the number of uninsured Americans and reduce the cost of health care. To do this, Obamacare lays out mandates, subsidies, tax credits and other mechanisms that will increase the number of insured Americans and make the delivery of healthcare more efficient thus reducing costs. One of the main mandates of Obamacare is to require insurance companies to provide health coverage to all applicants. These applicants are to receive the same rates regardless of their condition or present medical state. According to the Congressional Budget Office (CBO, 2012), the enactment of Obamacare will bring the cost of healthcare spending down for the federal government. In fact, it’s a very little known fact that private companies benefit from the law also. Fox (2012) wrote that:
“The effects upon the stock market are likely to be positive. Insurance companies like United Health (NYSE: UNH) and Aetna (NYSE: AET) are likely to continue the positive appreciation of their stock. There will be more insurance customers and the insurance carriers will be allowed to raise their rates to provide necessary medical care. Aetna appreciated more than thirty percent in the last two years, while United Health gained more than sixty-five percent in that same time period.”
Under Obamacare, families with group income that fall between the 100% and 400% of the poverty line can avail of tax credits that they can utilize in paying for insurance premiums. Such tax credit may be availed in advance or refunded. These families have no enough money to buy insurance but are considered to have more not to be qualified in the Medicaid. With Medicaid Expansion they can be covered. The federal government offers state government that will have Medicaid Expansion funding of 100% on the first three years and 90% on the succeeding years.
Small businesses defined as having less than 25 employees are also offered with tax credits for insuring the employees. Tax credit is at 35% for the first year and 25% for non-profit businesses. This will go higher in 2014, 50% and 35% respectively.
In Obamacare, it does not just resolves issues in income discrimination faced by Americans in having health insurance but also tackles discrimination in gender. If it is not known before that American women pay higher premium than men which excludes maternity coverage, with the advent of the Obamacare bill we are educated about it. By 2014, American women will have access to health insurance for the same premium as American men are paying. They will have access too, to birth controls, screenings and annual exams. Although there are companies that do not subscribe to giving women employees insurance with birth controls as part of the coverage as it is against the management’s religious beliefs. This is big news to women, who pay 31% more in healthcare cost compared to men (Chemali, 2012).
Another form of discrimination that Obamacare will address is the discrimination in coverage. There are states and non-profit agencies that individuals with pre-existing conditions can apply to for programs so they would not have to pay extra premium for their pre-existing condition. They can apply for the programs until pre-existing conditions clause in the health insurance policy are fully eliminated by 2014.
Senior citizens are largely a beneficiary of the Obamacare. Such benefits include 50% off of branded prescription drugs that are part of Medicare Part D for seniors that have reached coverage gap, relief for those who have experienced the Medicare coverage for prescription drug’s gap or “donut hole”, annual wellness visits and other preventive care, and other programs that will eliminate unnecessary re-admission to hospitals.
One particular benefit of Obamacare is the prohibition of the cancellation or voiding of the validity of a claim from the health insurance due to technical errors those insurance providers may find. Insured individuals can also try to appeal for the coverage of the insurance. Obamacare also seeks an explanation from the insurance providers for an increase in premium. Insurance provider should be able to justify the increase and they are limited to a 15- 20% margin on their profit.
Government on the other hand are setting up ways in improving health program. They are trying to recreate the primary care work force by providing incentives for those who work in underserved areas and as underserved areas are identified mostly as rural areas, the government is paving for a better salary for medical professionals to work in and leave underserved areas. Funds are available for establishing and re-establishing of health care facilities and for prevention and public health programs.
Health insurance would be accessible to more Americans as mandated by Obamacare and the federal government will provide funds to state that will give coverage to more of its constituents. Obamacare health insurance exchange pool will be available by January 1, 2014. This exchange is like an online market selling health insurance. Consumers can compare insurance providers, explanation of benefits and premiums among others pertinent in buying an insurance policy with ease. Government will also set up consumer assistance programs wherein consumers will learn of their rights, file a complaint or appeal and buy insurance policy and online information about the law.
Right now, setting up of the state run insurance exchange (on-line market for insurance) for some states, the donut hole in 2010, the national program to have access on insurance for Americans that were denied of it due to pre-existing conditions or Pre-existing Condition Health Insurance Plan (PCHIP), online information dissemination, discounts on prescription drugs, are among the others that have been implemented. The indiscriminate insurance premium for women will be implemented by 2014. Some are still in progress and would be felt by 2014.
Given all the above-stated benefits, the states can save billions of dollars in the long run as a result of the studies commissioned by the states of Nevada and Michigan on separate studies. Health insurance providers may have a decrease in margin per policy but will make billions as a result of millions of new consumers. The law suggests that by 2014, there will be a penalty of 1% of your income or $95 if you don’t buy health insurance. This is to ensure that the intended Americans will buy a policy to lessen the cost or if not a fine will at least compensate for the cost of health insurance of the others.
The applications explained above are just some of the intentions of the Obamacare, which in summary are to have maximum number of Americans insured and to reduce the cost thereby increase in profit. The question now is why, given the many apparent good intentions of the law, a good number of states are trying for a repeal of Obamacare? These are the two major potential unintended consequences of Obamacare: layoffs (the loss of jobs and job security) and off-shoring (sourcing from non US suppliers) of those requirements in the medical industries due to taxes. Obamacare, though unintentionally may result to layoffs as companies are anticipating the tax. Tax imposed on medical devices will not make the industry responsive to innovations. It may also lead them to venture to other shore if it will deem them more profit. Funds that may be available for research and development may be diverted to tax payment. Given that the tax anticipation will limit the funds and operations, this may result to layoffs. As for the existing medical devices in the market, medical industry may look for other avenue to make profit on them by selling them where taxes are lesser. This may even result to higher supply or making it available in other countries than US or worse, existing research and development will be patterned on the country where they could get a higher bid on the product.
Of these two potential unintended consequences, layoffs are the fastest to be observed. As a matter of fact, there are companies that have lain off employees and are giving signs that they are to lay off some of their employees of which they have not done before even during the crisis. Off shoring will take time as it will incur funding and the medical industries are still hoping for repeal.
Study Conclusion
Almost three years after the Obamacare was passed into law, we ask ourselves, how better (or worse) off are we, healthcare wise?
The average American will see a reduction in their insurance premiums as an estimated 30 to 44 million individuals will gain health coverage through Obamacare. This means that overall, the quality of health for the US will be better, because of the expanded coverage. In theory, the structural cost of healthcare will be decreased (for example the capital cost will be spread over a larger clientele base and should contribute to a decrease in healthcare delivery costs). Naturally, the direct health costs (medication, etc.) shall increase as the number or healthcare-recipients increases. Forbes’Arik Roy (2012) article on the Obamacare law says that the law itself is doubly bad in that:
“in terms of policy, is that Obamacare spends trillions of dollars subsidizing the cost of insurance for the uninsured. And most people who are uninsured are young. In other words, Obamacare will more than double the cost of health insurance for many young people, and then the law will turn around and spend taxpayer dollars to subsidize the purchase of this newly costly insurance. Only in Washington does this make any sense.”
For employees that are considered “middle income”, these Americans can use their tax credits and subsidies to make health care more affordable for them. Because of these tax credits and subsidies, big companies are burdened with the new cost for insuring their workers. These employers may, if it does not benefit them, decrease the quality of their workers’ healthcare to avoid paying higher tax requirements demanded by the law. The US Federal Government believes that only 1% of total business will be affected by an increase in tax requirements due to Obamacare.
Women benefit more from Obamacare by 2014, with about 47 million women in the United States gaining access to women’s healthcare, preventive and wellness services. Obamacare expands contraception as well, making it the most population-increase sensitive healthcare policy ever passed into law. Like women, low-income families will be benefiting from Obamacare because these families had very little or no health coverage prior to Obamacare. The number of expanding healthcare beneficiaries that were previously uninsured is estimated to be around 15 million. What is unfortunate is that some State governments can choose not to pay for Obamacare for the poorest of their constituents. This is widely known political backlash of Obamacare that will not go away because of the partisan politics in the US.
Lastly, senior citizens will benefit most from Obamacare due to the unprecedented coverage that it provides them. This include reforms to the existing Medicare and Medicare Advantage systems, that makes sure the aging American population receives better healthcare coverage.
In three years of the implementation of Obamacare, the US healthcare system is categorically better for some sectors of the population and worse off for a few others. Repealing the law, which is what some opposing policy makers are espousing in the last two years, is not a simple gesture of removing Obamacare and replacing it with a new system, frankly because, Obamacare does reach out to more healthcare recipients than any other health care policy the US has purposely implemented. This makes Obamacare successful in this sense. The economic side of the law however, goes against some conventions, particularly that of being overly dependent on the Federal Government, thus “crowding out” private sector involvement. Obamacare’ s actual success or ultimate failure will be seen after 2014, when the law is fully implemented and its phased-in programs are completed. Only then will we know.
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