Economic
Effects of Obama Care
Kunsoo Paul Choi, PhD
The
Patient Protection and Affordable Care Act (PPACA), more widely known as
Obamacare, became available on October 1, 2013. Obamacare is one of the hottest
issues (if not the hottest) right now among all Americans whether or not they
need it as it will affect them in certain ways – their health care premiums,
tax amount, their lifestyle, and the U.S. national debt. Why so many people oppose this Obamacare if
it really can improve the U.S. health care system and decrease health care
premiums as President Obama and his fellow Democratic Congressmen repeatedly
claim? Obamacare is considered as a major health care reform since Medicare and
Medicaid were created and introduced in 1965 during the President Johnson
Administration. It is less doubtful that Obamacare is beneficial and affordable
for those below average income American people (at the cost of top 2% of rich
American people and businesses).
Benefits of Obamacare
There
are some benefits of Obamacare, especially for those people whose income level
is below average or less than 400% of the federal poverty level (FPL). It is
very difficult to purchase a health insurance policy when it costs you 30% or
even 50% of your income. However, now you can obtain Medicaid if your family
income is less than 138% of FPL or you will be subsidized in purchasing a
health insurance if your household income is between 138% and 400% of FPL.
Although
it may be a little bit different among states, if your income is 138% of FPL,
you only pay 6% of the health insurance premium or 2% of your household income.
If your income is 400% (or less) of FPL, you pay 30% of the health insurance
premium or 9.5% of your household income.
Many
uninsured Americans can now obtain a health insurance with Obamacare. The
current number of 47 million uninsured people will definitely be reduced to
less than 20 million people in a couple of years with the government subsidy
and/or with the fear of penalty. So, what are the problems with Obamacare?
Isn’t it okay with those top 2% of high income people whose annual earnings are
more than $250,000 although they should pay more amount of taxes?
A Probable Increase in
Health Insurance Premiums
More
people will now have a health insurance policy as they are required to buy one.
Otherwise, they will be fined. Those people who never went to a hospital and now
only pay a small amount of health care premium want to go to a hospital more
often as their health care policy is really nice considering their required
payment. There will be more adverse selection and moral hazard problems that
will contribute to an increase in premiums. Many people already complain about
a long line or longer appointment time. Medical doctors who do not like to be
controlled and supervised by the government want to switch their job places or
reduce their work hours. A stricter guideline or qualification of a health
insurance policy is another factor that will increase a health insurance
premium for average Americans. According to the market demand and supply rule,
it seems to be obvious that the average health insurance premium will go up
whether or not you go to a hospital often. Thus, Obamacare will negatively
affect many average Americans who currently have their company health insurance
or private health insurance.
Disincentives to Many
Small Business People and Their Employees
Those
who are proponents of Obamacare argue that the majority of the U.S. businesses,
96%, have less than 50 full-time employees and that they are not affected by
the Obamacare requirement. And the majority of businesses whose full-time
employees are more than 50 people already have employee health insurance. So,
those small businesses that are affected are less than 1% (even less than
0.2%). So, can this number really be ignored? As they indicated, the 96% U.S.
firms are small businesses whose full time employees are less than 50 people.
And they are the ones who have been struggling since the 2007-2009 financial
crisis. With the current Obamacare system (although its implementation for
small businesses is delayed to 2015), many small business owners may lose their
incentives to increase or expand their business with more full-time workers as
they should pay enormous employee health insurance or enormous amount of
penalty if they do not offer health insurance to their full-time employees. The
current full-time full employees of those firms whose number of full-time
workers is between 50 and 100 should be concerned about their chance of losing full-time
status. And the current part-time employees will see that their hope of
becoming full-time employees is faded away. So, it is not just less than 1% of small
businesses and their full-time employees that will be affected by the
implementation of Obamacare.
Obamacare and the U.S. National
Debt
According
to the Congressional Budget Office (CBO), Obamacare is estimated to cost about
$1 trillion over the next ten year period. However, this estimate will continue
to increase significantly as there are various items to be included in the cost
estimation as time goes on.
The
Obamacare proponents claim that these expenses can be covered by the taxes and
penalties and will not affect the national debt. Rather, the end result will be
the reduction of the budget deficit by $200 billion over the next decade. The Obamacare proponents also claim that
Obamacare will reduce $716 billion from Medicare and can reinvest money to the
Obamacare program. However, as the beneficiaries of Medicare will include those
low income people up to 138% (or below) of FPL, we do not see that Obamacare
can cut that amount of money from Medicare. The expenses of Obamacare cannot be
covered by the taxes and penalties unless the government increases taxes by a
lot.
Then,
what will happen next? It will be an enormous increase in the U.S. national
debt. The $16.7 trillion debt ceiling was broken in the middle of October 2013
as Congress agreed to increase the debt ceiling to avoid U.S. default. What is
the current national debt two month after? The national debt as of December 2013
is $17.24 trillion (an increase of $54 billion beyond the previous debt ceiling
of $16.7 trillion). The astronomical increase in our national debt is already a
serious problem and will be a detrimental problem in a near future, maybe
within 10 years.
Closing Remarks
Obamacare
is surely beneficial and affordable for many below average American people who
could not buy health insurance and could not go to a hospital although they and
their children are very sick. However, Obamacare may become less affordable or
unaffordable for many other average Americans as it may increase their health
insurance premiums or may degrade some small business full-time employees to
part-time status. Furthermore, Obamacare may rob us of our freedom of choice in
the name of legality.
