Affordable Care Act (Obamacare)

I have been wondering about the facts of the Affordable Care Act (ACA) for some time now. As a result, I began to study the actual writing of the Act and different articles that are either in opposition or in support of Obamacare. I had heard many rumors. For example, I had heard the rumor that doctors would receive a salary cap as a result of the ACA. However, I found that this wasn't true after reading every word contained within the ACA.

Despite that I was able to debunk that rumor, some of my other concerns were confirmed. The biggest theme to this Act that has jumped out to me is that fact that it appears to be geared to help families within poverty limits and the middle class to be able to afford health insurance. For example, those who are between 100% and 400% of the poverty line could receive tax credits so that health insurance is more affordable. Also, more people will have increased access to Medicaid beginning in 2014. Just with these two examples, the demand for healthcare will greatly expand. Therefore, there will be a greater need for doctors, physicians, specialists, nurses, etc., to be employed in the healthcare industry. If there is no increase in the supply for employees of the healthcare industry, prices will rise and the ACA will actually hurt insurance companies because they will be the ones who are taking the biggest hit of the increased cost.

What I find interesting is that the writing of the ACA states in Title I that the market for insurance will be more competitive. I find it difficult to believe that the market for insurance will be more competitive while being less attractive as a result of increased costs due to the provisions of the ACA.


Dave Tufte said...

Jake: 100/100.

OMG Jake: you sound like an economist! Now you'll have to start keeping your opinions to yourself in polite company or you won't be invited back ;)

The failure of basic economics in Obamacare is nothing short of astounding (comparable to the legend that King Canute commanded the waves to stop rolling in).

The basic suppositions are that 1) there isn't enough healthcare being consumed, and 2) the price of healthcare is too high.

In demand and supply, if you want Q to go up, and P to go down, you get this by shifting supply to the right/down. This basic concept is absent from Obamacare.

Instead, it is mostly about subsidizing demand. This shifts demand right/up. This will increase Q, but will also increase P.

I may be cynical, but the reason you'd pass something that only gets half of this right is so you can continue to claim credit for it in the future as you continue to screw around with it.

John Smith said...

I find this article interesting to read at the end of 2015. Being an accountant by trade, I have watched how Obamacare has affected my profession. On about 25% of the tax returns I have completed, clients have had to pay a penalty, due to no insurance coverage. On every single one of those returns, when I have called the client to determine insurance coverage, 100% of the time the client will say to me: “No I don’t have coverage, I can’t afford it anymore. The penalty is less than the premiums they want me to pay.” It seems as though the ACA has not had the desired outcome of insurance becoming more competitive.

Recently, Arches Health Plan, a Utah-based insurance company, had to shut down, due to lack of payments from the Federal Government’s Risk Corridor Program for insurance companies. However, Arches isn’t the first company to shut down. Insurance companies in nine other states have had to shut down, as well.

Until the non-insurance penalty is high enough, making it cheaper to pay monthly premiums than it is to pay the penalty, people will continue to opt out of the insurance programs. This is going to lead to more insurance companies going under. Eventually, the only insurance option left will be Medicare, with the government providing universal healthcare. I might be a cynic, but maybe this was the plan all along.

Dr. Tufte said...

John Smith: 50/50

The sentence "It seems as though the ACA has not had the desired outcome of insurance becoming more competitive." may be true, but it doesn't follow from anything you said in that paragraph.

And in the quote: "No I don’t have coverage, I can’t afford it anymore. The penalty is less than the premiums they want me to pay.” the last sentence is correct, and the middle sentence might be correct, but the one doesn't follow from the other.

I think you're generous in calling Arches an insurance company. Yes, that's what they called themselves, and what the government called them too ... but they weren't an insurance company in the conventional sense. Instead, they were ... hmmm ... government motivated ... private firms, that operated as non-profits with subsidized loans. It's hard to reconcile their creation with anything other than cluelessness about industrial organization, and denial of business realities with wishful thinking. My best guess is that the thinking was that healthcare insurers make too much profits (which is not what the data shows if we look at stuff like ROI), they were able to do that because they were in an oligopoly (which is true, but you don't earn profits because your an oligopoly so much as you become an oligopoly to have a chance at making profits), and that labeling a firm a non-profit would keep it from losing money (even though increasing the amount of competition in an industry would reduce revenue to each participant, thus making it harder for anyone to break even). I'm not making any claims to liking the way healthcare insurance was organized before, but a proposal like this would get a failing mark in pretty much any ManEc course.

And, technically, yes, Arches and other "co-ops" went under because of low payments from the Risk Corridor program. But that program, which is kind of similar to how the big sports leagues transfer revenues from the richer teams to the poorer teams, was designed too optimistically, and without flexibility to change on the fly.

I think your last paragraph hits the mark. But why not put some game theory in it? Because that's really what this is: a sequential game that is rigged to favor Medicare. I am not sure that I go in for the criticism leveled by conservatives that it's all about funneling people into that program. I'm much more cynical than that. I think members of the government view Medicare as "working" because they are not recognizing the present value of its future liabilities. Because they aren't thinking about it like a business proposition, they've convinced themselves that it's in better shape than it is. Even so, they admit that it is floundering a bit, and a lot of Obamacare amounts to finding new revenue sources to be fed into Medicare. That's really bad if they're fibbing that it's sound to begin with.