Thesis on "Affordable Health Care Act Impact"

Thesis 25 pages (8273 words) Sources: 20

[EXCERPT] . . . .

By law, persons who for religious or other reasons are unable to join these schemes are exempted. According to Scott (2013)

, it is this duty of individuals that makes universal coverage possible. Without this legal mandate, a large number of persons who are healthy would not see value in risk pooling and thus would not enroll for insurance coverage. Similarly, private health insurance would not eliminate discriminatory pricing that favor the healthy individuals. Private insurance providers cannot protect themselves from adverse selections since they have a duty to provide insurance to all individuals.

As suggested by Genevieve et al. (2012)

, the ACA is basically a three-legged stool that connects the broken ties between employers, private health insurers and individuals. The first stool leg includes proposed reforms to the non-group insurance market. The act outlaws exclusions for persons with pre-existing conditions and other insurance discriminatory practices of the past. This guarantees access to non-group insurance for all individuals despite their health condition. It also imposes limits on differential pricing by insurers based on the health status of individuals. Previously, health insurance providers charged differently for smokers and non-smokers, and different age groups. This differential pricing has been outlawed. Further to this, minimum standards to be met by insurance providers have been set in both non-group insurance and small group insurance markets. These standards provide a list of minimum essential benefits that individuals should receive that meet the minimum actuarial value of the insurance package

These reforms are viewed by most health care experts as being long overdue. However, some argue that the reforms create a vacuum in which individuals cannot survive. In as much as the Affordable Care Act guarantees insurance access for individuals at fair prices despite health status, it creates some issues since many individuals may decide not to purchase insurance until the point when they are sick and really need it

. This would make better financial sense for these individuals since they would purchase insurance at average prices. On the other hand, insurers will have to charge higher prices because the pool purchasing health insurance will be sicker than the average

. This will adversely affect price of health insurance by making them higher on average in the end and lead to failure in the insurance market. This foresight is supported by precedence where five states that attempted to reform their non-group insurance market in the 1990s faced challenges by the mid 2000s when they became the five most expensive states to purchase non-group insurance

According to the author, the second leg of the stool is the duty of individuals to purchase insurance, referred to as an individual mandate. Citizens and legal residents of the United States are required to have health insurance coverage or face a steep penalty of two and a half percent of their income. As suggested by Rosenbaum (2011), this individual mandate creates issues for the health care system because it would make it impossible to make insurance affordable since for individuals to fulfill the requirements of their legal mandate, they need insurance to be affordable in the first place

. This is an unhealthy reliance on affordability of health insurance, which is also the desired objective of the Affordable Care Act.

The third leg of the stool is the government providing subsidies to make insurance affordable for low income or poor families. Under the Affordable Care Act, two forms of subsidies are provided. The first is by expanding Medicaid to all individuals whose income falls below 133% of the poverty line. Second is through tax credits provided to individuals to offset the cost of non-group insurance that they purchase privately. These tax credits are capped at three percent of their income at 133% of the poverty level to nine and a half percent for individuals at 400% of the poverty line

. This cap is meant to limit the share of income that the individual spends on their insurance and indirectly to reduce the price of insurance since providers will have to stick to amounts provided under these caps. The only individuals that are exempted from this individual mandate are those whose incomes fall below 400% of the poverty level or where the cheapest insurance option that is available to them costs them more than eight percent of their gross income.

The Affordable Care Act proposes financing of these tax subsidies from several sources. First is by reducing the reimbursements provided to private insurers under the Medicare Advantage program that provides alternatives to the government's Medicare program for the elderly. Fourteen (14) per cent of subsidies will be funded through this source. Thirty-three (33) per cent of subsidies will be funded through reductions in reimbursements for Medicare provided to hospitals each year. Since the Affordable Care Act proposes elimination of inflation adjustment provided to hospitals, funds will be freed up for tax subsidies. Twenty-one (21) per cent of these tax subsidies will be financed through increasing Medicare payroll tax by roughly one (1) per cent and extending this tax to capital income for those individuals earning more than 200,000 annually and families earning more than 250,000 per year. Eleven (11) per cent of tax subsidies will be funded through new excise taxes that will be levied to several sectors of the U.S. economy that will benefit from increased health insurance coverage of medical spending in the United States such as pharmaceuticals and medical device companies. The non-deductible fourth (40) per cent tax levied on insurance products that cost more than roughly $10,000 for individuals or more than $27,500 for families in the year 2018, also known as the Cadillac tax, will provide three (3) per cent of funding for tax subsidies. These limits will be revised annually based on the consumer price index. The last source of income for these tax subsidies is penalties paid by employers and individuals and taxes charged on individuals with higher wages resulting from reduced spending by employers on insurance. This will fund twenty-one (21) per cent of the tax subsidies

Aims of the Affordable Care Act

Rosenbaum (2011) states that the Affordable Care Act consists of 10 separate legislative titles with several aims. The main aim, as earlier described, is to drive the health system as close as possible to universal coverage

. To do so, the act proposes the importance of shared responsibility between the government, employers, and individuals. As suggested by Rosenbaum (2011), this central aim of the Affordable Care Act is the subject of majority of debate by scholars, congress, and other health care experts

. Economists in particular have argued that universal coverage, though justified, is difficult to achieve because of the change of unforeseen illnesses or injury that will increase costs considerably. On the other hand, economists have praised the law placing individual responsibility in achieving universal coverage since it encourages citizens to opt in to medical insurance schemes thus increasing coverage considerably

The second aim of the Affordable Care Act is to make efforts towards improved quality, affordability, and fairness of health insurance coverage. Further to this aim, as suggested by Bradley and Lentz (2011), the Affordable Care Act strives to ensure costs of treating the uninsured are not covered by the society rather this is covered by hospitals and insurance providers

. By converting the non-group insurance market of the U.S., the act aims to ensuring majority of the population have health insurance and significantly they expand their public insurance and subsidies to private insurance to increase affordability of health insurance thus increase coverage. By increasing revenues for insurance providers through subsidies and tax breaks, the act aims at reducing and reorganizing spending under the country's largest insurance plan, Medicare. As posited by the authors, this will lead to increased fairness and affordability of health insurance in the country

The third aim of the affordable care act is to improve the value, quality, and efficiency of health care by reducing overspending or wasteful spending in the country and increasing accountability. Scholars have argued that the Affordable Care Act may lead to increased efficiency of health care services by ensuring accountability of individuals, insurance providers, hospitals, and employers

. At the same time, the increased coverage of the American population may make it harder for this because the number of people accessing this services will increase considerably compared to the number of providers which projections state will remain the same as some are skeptical about the provisions of the law.

The fourth aim of the Affordable Care Act is to strengthen access to primary care by ensuring long-term changes in the availability of primary preventive care are implemented and sustained. Preventive and primary care is a core part of the Affordable Care Act. According to projections provided in the act, increased spending on preventive care is expected to reduce expenditure on other services in the health care sector considerably.

The final aim of the reforms proposed in the act is to ensure that strategic and informed investments… READ MORE

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