The Affordable Care Act (Obamacare) Explained

In 2009 when President Obama first took office, America faced a serious healthcare problem that had been ignored for decades.  Significant changes needed to be made to address our nation’s problems, which included rising costs and inadequate care following a trajectory to insolvency.  At President Obama’s inauguration forty-five million citizens did not have access to insurance, using the emergency room as their primary care facility.  Medicare and Medicaid were facing default and driving federal deficits to record levels. The private healthcare industry accounted for 21 percent of total US GDP, contrasting with 11-13 percent for comparative nations.  In addition, the US healthcare budget faced $60 trillion in unfunded liabilities over the next 75 years, with no solution.  To compound the problem, private industry was leveraging tax-payer dollars for short term profits, disregarding long term accountability.

At first glance the challenge to obtain healthcare solvency appeared insurmountable.  Many demanded scaling back Medicaid, while others wanted to implement similar single-payer programs as found in Germany, Japan, Canada, or England.  Several blamed insurance and pharmaceutical industries for driving costs, and others cited frivolous lawsuits which drove doctors to provide unnecessary care.  Almost all voices aligned that cutting Medicare was not an option due to voter demographics, and any legislation to weaken private industry would be met with cries of socialism.  It was under these conditions that the Affordable Care Act (ACA) was debated and passed which brought together ideas from every political ideology.

The Affordable Care Act, also known as Obamacare, is one of the most significant pieces of legislation signed into law in the recent history of the United States. Although the law is complex and appears ambiguous, understanding the intent of this law is critical to evaluating its merits. Simply stated, the ACA can be broken into three areas of responsibility:

Business: Shifts healthcare responsibility away from the government to private industry.

Individual: Levels the playing field between private healthcare providers through the use of exchanges, thereby fostering competition for individual policies.

Government: Expands state Medicaid to cover families under 133 percent of the poverty line (Medicaid currently covers up to 100 percent).

Business Responsibility:

Large corporations with elastic goods depend on low cost structures and therefore low wages. In many regards these businesses are as dependent as the lazy, using government to subsidize their benefits and pocketing the difference. Almost half of the uninsured (46%) work full time with 28% working part time.  Many of these full time workers are employed by companies like Wal-Mart, whose average associate receives $1,000 in annual government entitlements.  Subsidizing benefits with governmental entitlements has allowed corporations and shareholders to enjoy record profits.  They also place greater pressure on government liabilities and drive up costs to taxpayers.

Health Care Expenditures by AgeObamacare (ACA) holds all businesses and corporations responsible for supplying healthcare.  If a business employs more than 50 full time workers, they are responsible for providing insurance or paying a penalty (the implementation of this mandate was recently postponed for a year).  If a company employs 25 people or less, tax credits are provided to subsidize coverage. Seventy percent of all healthcare costs happen in the final fifteen years of an individual’s life, typically while under the umbrella of Medicare.  Access to life-long preventative medicine is critical in lowering Medicare liabilities.  Shifting coverage to private industry also lowers the government’s emergency room expenses which the uninsured use in place of primary care physicians.

There has been significant reaction to the healthcare law’s corporate directive.  Mandating industry to provide insurance for their employees will increase costs for any entity not already doing so today.  This is a fair criticism, especially when it comes to small businesses that cross the fifty employee threshold.  However, looking at cumulative data and avoiding anecdotal arguments allows for a balanced discussion of the overall impact.  When it comes to small business, less than ten percent fall into that much-discussed mandated responsibility, as the other ninety percent currently meet Obamacare (ACA) requirements.  To assist both the ten percent and the 90 percent, Obamacare gives access to competitive exchanges (known as SHOP) which will drive down costs for employers currently offering healthcare.

Individual Responsibility:

When an individual is not covered by an employer or as a dependent, they are responsible for their own insurance.  Beginning in October 2013, the government will create a competitive vehicle where insurance companies meeting basic requirements can compete for business. Similar to websites Expedia or Lending Tree, once personal criteria is entered, insurers will publish rates and the consumer can choose a plan based on price or benefits.  Known as insurance exchanges, these will be launched nationally to help consumers make educated choices and provide a baseline for coverage comparison.  Exchanges will soften interstate requirements and prerequisites allowing for productive competition between insurance providers.

Similar to existing employer-provided healthcare, a person’s individual policy will also allow access to preventative medicine. Even more important, individual healthcare will allow small firms (fewer than fifty employees) to compete with the benefits of larger firms when attracting employees as benefits are universally.

Health Care Costs Over TimeSince the bulk of uninsured individuals are under 35 years (65%), providing coverage for them is critical to lowering costs for all private insurance companies, given their healthy age demographic.  These younger, healthier participants are needed to offset high risk individuals, much like auto insurance or Medicare.  Because the inclusion of low risk individuals is critical in driving down costs, it is imperative they sign up.  One of the concerns is that uninsured individuals will forgo purchasing their insurance until they need it.  At this point, the only penalty they will face is an $89 annual tax, which is not very persuasive.  However, if the exchanges are able to drive down prices making health insurance affordable and attractive, this concern should be overcome (we will know in October).

Government Responsibility:

On the government side, Obamacare (ACA) legislation mandated that State Medicaid programs cover individuals whose annual earnings fell within 133 percent of the Federal Poverty Level (FPL). The FPL currently covers at 100 percent, so the ACA provided funding to cover the increase; however, this mandate was struck down by the Supreme Court.  States can now opt out of expanding Medicaid, forgoing federal subsidies and leaving millions of their state residents uninsured.  Since those  in this demographic tend to be part of the healthier population, the aforementioned balance between the healthier individuals providing offset to sicker individuals will be more difficult to obtain, and insurance prices may not reach their full potential.

Living in Arizona and watching the fight over Governor Brewer’s decision to expand Medicaid, it’s hard to understand why any state would opt out.  The expansion will bring additional funding, jobs, and access to healthcare. States rejecting the Medicaid expansion will lose out on $8.4 billion in federal funding, exclude coverage for 3.6 million uninsured, and see $1 billion more in uncompensated spending.  Even more problematic, states rejecting expansion will see non-reimbursable emergency room and Medicare costs grow.

Political Blowback:

While I have argued that healthcare coverage is a three-pronged responsibility, many feel that a single payer healthcare system is the preferred model. This caused some to level the charge that President Obama did not fulfill one of his signature promises from the 2008 campaign: obtaining single payer healthcare.  Instead he took Governor Romney’s framework from Massachusetts, authored by the conservative Heritage Foundation, and leveraged the plan in a spirit of compromise. Initially this infuriated supporters as they felt betrayed on an issue they believed was mandated from the decisive election victory.  While President Obama may have expected this, what he probably didn’t expect was the venomous backlash from the right, even though the ACA is based on a healthcare plan they helped create, implemented by a popular centrist Governor.

Perhaps what opponents are politically afraid of is not the demise of the American healthcare system, but the potential success of Obamacare (ACA).  Currently three states have released preliminary pricing for their healthcare exchanges with better-than-anticipated results.  By October all states will see competitive pricing on the exchanges and citizens across the US will begin shopping for their preferred rates and cutting through political propaganda. For the governors of states that rejected the expansion of Medicaid, they will have to explain to 3.6 million employed voters why similar citizens in other states have healthcare and they do not.

Final Thoughts:

While no legislation is perfect, the ACA improves access to healthcare, not only for the uninsured, but also sets guidelines to improve care and protect consumers through some of the following benefits:

  • Pre-existing conditions will not be a barrier to coverage.
  • Preventative medicine will be included by every approved insurer saving billions of dollars on Medicare.
  • A defined percentage of insurance revenue must be applied to the actual care.
  • Parents can keep their dependent kids on their insurance until the age of 26.
  • Insurers cannot drop coverage due to personal changes in healthcare.
  • Doctors will be paid with Medicare rates, currently higher than Medicaid rates.
  • The “lifetime cap” for individual reimbursements is removed.

Perhaps the biggest criticism is the expense of the Affordable Care Act (ACA). But according to the non-partisan CBO, Obamacare (ACA) is deficit neutral.  If Obamacare was to be repealed, there would be no change to our annual deficit or national debt.  Any additional costs associated with the law are offset primarily by scale and penalties paid by those unwilling to buy private insurance.  In fact the latest projections by the CBO resulted in $150 billion budgetary savings over 10 years versus the system currently in place. Opponents also charge that Obamacare is a tax for those who remain uninsured.  This is a fair statement; however the receipts collected will help offset emergency room liability for the uninsured that all taxpayers subsidize today.

To understand the new healthcare law, it is imperative to ask the right questions in order to open up honest debate.  Obamacare (ACA) is a far cry from socialism; its main purpose is to reduce Medicare and uninsured emergency room expenditures through access to care.  It uses tax penalties to push citizens away from government and into the hands of private insurance companies.  Obamacare (ACA) also delivers improved quality of life due to access to health care, unattainable for most Americans due to cost — a significant benefit to society. Finally the most compelling argument for the ACA is our inability to call the United States the greatest country when our healthcare expenditures are the highest in the world and millions of our citizens lack basic insurance coverage.  The Affordable Care Act still needs revision, but it is a much needed improvement over the previous status quo.

Thanks to Elizabeth Eastmond for her edits.


  1. So many words so little said. I should have predicted that such a column would appear the week the acting chief of the IRS told Congress that he does not want to be held to account under the rules that his agent will enforce upon fellow Americans…The ACA does not need to be explained it needs to be abolished. The epitome of governmental, nanny politics hypocrisy, the ACA has come, this past week especially, to represent the “do as I say, not as I do” mentality made famous by the liberal elite. We can and should debate the needed changes to healthcare but to assume this can be explained away are short sighted and wrong. When the newly implemented law’s major enforcement arm (IRS) wants nothing to do with it for themselves, and when labor unions, perhaps one of the great sources of funding to left leaning politics, beg for exceptions, when one of the architects (Senator Max Baucus) of this legislation now call it a train wreck, this kind of political palaver serves only as the kind of attempt that the slight of hand serves a magician – a distraction from the real action. If Big Business can receive a delay in the employer mandate, then why not the individual? If the left is the real champion of the little guy, as they would have us believe, then why not delay the individual mandate also? Or would that come too close to an admission that this ‘cornerstone’ legislation was both poorly crafted and horrendously implemented?

  2. Those who don’t like the ACA seem to already have insurance through their work. Those who are excited to see it implemented are those who are self-employed, under-employed, or have pre-existing conditions that would make insurance rates too high to afford. Thank you for making the plan a little more understandable.

    1. Here’s something to try and understand: Obamacare aims to add coverage for x (fill in your favorite stat) million additional patients who were previously not covered, keep the same number of physicians, and reduce the overall costs of healthcare. I teach economics, the first two features of the plan guarantee that the reduction can’t happen. More people = more cost.

      More demand with the same number of suppliers guarantees a rise in prices. Even Harvard economics classes teaches these two things. The thirs policy, the requirement to accept applicants with pre-existing conditions will increase the costs for the insurance companies, who will simply pass that cost on to their customers in the form of higher premiums. At my place of employment (an educational institution)our rates have risen 30% since the passage of Obamacare, in anticipation of the dictatorial legislation taking full effect.

      And finally, the employer penalties for refusing to allow the government to dictate personal private business decisions, means fewer jobs and lower income for the employees. Employers will (and already are) reduce hours of their employees below the threshold amount to avoid having to provide healthcare benefits.

      No wonder they are delaying full implementation. It’s broken, and only repeal will fix it.

      1. Hi Rick — I appreciate the comment and reading the article. I have thought about the economics as well and here are a couple of discussion points:

        – The expansion of medical programs and students applying for medical schools is growing exponentially. I think there will be pain in the short term as supply for physicians will need to catch up with demand. I also wonder in 10-20 years if we will have overcorrected when the boomers start falling off.

        – If 40 million additional citizens buy healthcare with Obamacare that would be a 12% growth in insured citizens. Remember that these 40 million are primarily low risk and none are on Medicare or disabled — which are demographics that put the greatest pressure on medical services.

        – There might be a small rise in price due to demand, but that should be more than offset by access to preventative services which will save billions on the back end. In writing my article I found many examples of the uninsured elderly waiting for access for Medicare, then having 5-10 years of unchecked cancer treated once eligible. This is a problem.

        – As an economics teacher you should be aware that pricing happens when costs are incurred, not anticipated. If an insurance company, in an elastic marketplace, was to raise costs, they would lose customers. Any company that understands the rules of supply and demand would wait until the last minute to take pricing, pick up the low hanging fruit of companies that priced ahead, and maintain those customers once total market prices are reflected. After working for P&G for 10 years if there is one thing I know, is following pricing is less painful than leading pricing.

        – The vast majority of companies in the US do not fall under Obamacare penalties because they already comply. You make the point that government should stay out of private industry. Would you keep consistent language believing that those same individuals working for companies that do not supply healthcare, not be allowed in emergency rooms or have access to Medicare or Medicaid? If that is the case I will give you credit for being consistent, but obviously I would see the position as heartless. Remember the uninsured are not the lazy — they are typically full time employees that do not receive sufficient healthcare from their employers.

        One more thought – If anyone should champion the ideas of marketplace exchanges, a vehicle to level the playing field of private insurance and foster competition, it would someone who teaches economics. With this being said this discussion is moot. We will find out in the next 45 – 60 days if the exchanges really can drive down pricing with competition. Scale is the greatest asset to Obamacare, and like any business, scale is the greatest deliverer of cost savings.

        1. Matthew, thanks for your comments. I have just a couple things in response. First of all, in the true market economy, businesses are loath to raise prices, but here, we have a captive audience.

          principle of force is the destroyer of economic freedom. If everyone is mandated to have healthcare, the very companies that Obamacare is supposed to be “reigning in”, don’t worry about raising prices ahead of full implementation. They know that the age 26 provision, the pre-existing provision, and the financial hit for not buying insurance will drive the helpless cattle into the pen. There’s nowhere else for them to go. And these exchanges, though they might provide some choice, are still limiting the free market.

          Add the fact that many employers are reducing payroll hours below the threshold, and you have additional people forced to buy more expensive policies on their own. Force is the antithesis of “affordable”. Competition drives down prices and increases quality, whatever the product.

          1. Thanks Rick — the only assumptions I will challenge is that insurance companies will not be impacted by raising prices and that the uninsured will blindlessly choose a plan.

            The laws around the ACA remove barriers for insurance companies to compete. I honestly believe that competition will shed their current leashes and what you will see is increased competition which will benefit the consumer. It worked in MA, and the three states that have reported preliminary pricing for the exchanges show very compelling results.

            I do agree that companies with more than 50 employees might shed hours to avoid the penalties — and that is a worry. To counter act, Obamacare provides subsidies for small businesses under 25 employees to off set healthcare costs making them more attractive to the under insured. Also — the latest study around companies trying to avoid the 50 mark penalty show they are small in number. Less than 10% of small businesses with more than 50 people do not currently provide healthcare. Plus, as I mention in my article, the exchanges will also be set up for small businesses to foster competition and net a positive impact on healthcare expenditures.

          2. Thanks, Matthew. I would really like to have the sources for your statistics so I can verify them and share with students and others. Is that possible? Thanks again.

          3. Sure: First there is a great article in Forbes about the impact to businesses:

            Kaiser did the research on firms larger than 50 people and found that 90+% offered healthcare:

            Here is another write up by Kaiser on the preliminary pricing results of the exchanges from Calironia, one of three states who have released pricing information.

          4. I know I’m late to the game, but I think any discussion of the rise in insurance premiums needs to be taken in context. Insurance premiums have been on the rise for decades, largely due to increasing health care costs which have outpaced inflation for the same time period. From 2000 to 2003 insurance premiums increased by 11%, 10%, 13% and 13% each year. Compare that to 2009-2012, which saw increases of 5%, 3%, 9%, 4%. Obviously these numbers don’t mean that recent increases aren’t attributable to the ACA, but they do provide a broader perspective for the discussion of premium hikes. Conversely, we can’t automatically attribute any rise in insurance premiums to the ACA when premiums have been steadily rising at roughly the same pace for decades. If the recent rise is due to the anticipation of insurance companies, we will still need to wait several years after the legislation is fully implemented to see if future rises are curbed, or even reversed, to comment on the impact of the legislation.

            –the figures come from Kaiser survey of employee benefits 1999-2012 but I don’t have the link right now.

          5. Thanks Tim for your post. My observation on your contribution, without trying to be rude, is that it’s basically what all the defenders of Obamacare say. Taking this issue “in context’ leads to these contextual obserbations, which I believe are not really disputed.
            1. The bill itself was written, marketed, and praised in terms of LOWERING the costs of healthcare in America. The name of the legislation is a bit of propaganda. The results so far are the opposite. I’m not aware of any individual or company that has seen a reduction on costs due to the impact of the bill to date.
            2. Much of the rise in HC costs can be attributed to the fact that there has been a lack of competition, due to the fiefdoms carved out by many insurance companies in certain states because of legislation that prevents true market entry for any company to offer insurance products across state boundaries or wherever they chose.
            3. The quality and wide availibility of our healthcare system is higher than many of not most countries. Everyone knows that many people come o the US for healthcare when they could get it cheaper in their own countries. Caviar costs more than Mad Dog, but many still prefer Caviar.
            4. The statement: “we will still need to wait several years after the legislation is fully implemented to see if future rises are curbed, or even reversed, to comment on the impact of the legislation”, sounds a lot like Nancy Pelosi. It’s really not wise to pass a bill just to see what’s in it.
            The “wait and see” attitude is just unwise,

          6. Rick, thanks for responding, however you’ve dismissed my comment without actually addressing it. I was responding to your assertion that insurance premiums have risen “in anticipation of” the implementation of Obamacare. My primary assertion was that given the historical trend of insurance premium hikes, one would have an uphill battle explaining how current hikes are largely due to the anticipation of Obamacare and not all of the myriad contributing factors that have similarly influenced premiums for decades.

            With regard to observation #4 I’ll just say that I believe you misunderstood my comment. I’m not advocating a wait-and-see attitude with regard to passing any legislation. There are all kinds of good projections which have been set forth for legislators and the public to evaluate. I was just stating that calculating the actual impact of the legislation could only be done after it was fully implemented. Attributing the cost of your personal premium to the ACA before it has been fully implemented and without supporting data seems premature at best. The rest of your contextual observations are, in fact, disputed to varying degrees (especially #3) and beyond the limited focus of my comment.

  3. Great post Matthew. To Counter Jary, this is the Mitt Romney plan word for word. We’ve seen this plan work in Massachusetts and I’m sure Christ has a smile on his face because 99% of citizens in that state have access to quality health care. And, where are all these people that do not want health care for their families? Bottom line, it’s irresponsible for any head of household to not cover their family as we collectively pay for that care when something goes wrong. As an example, someone in our family is dead set against this reform now that they found a good job with health insurance, but just 5 years ago he was working for himself and could not afford healthcare, but had twins 2 months early which required what had to be hundreds of thousands in health care. ObamaCaresForUS would have made that entire ordeal much less stressful. Again, folks like us have Christ on our side in supporting this universal healthcare legislation that use to be a conservative Orin Hatch, Mitt Romney, Heritage Foundation plan. The opposition, I hate to say it, is only against this because of the person that made it law.

    1. Rob, one friendly caveat. Please don’t lump everyone in “the opposition” as racists, or “right=wing nutjobs”. You really have no idea as to the reasons people oppose Obamacare.

  4. Jary — To me it’s simple why labor unions want nothing to do with this legislation — it undercuts their business.

    Labor unions are paid by employees to generate the best pay and compensation packages possible. Their value is inherent in the value they provide to their clients. People forget that labor unions are a for-profit machine. The problem with unions is they are antiquated and becoming more irrelevant. When Healthcare laws are passed mandating employers to provide healthcare for their employees — they have just removed one of the biggest bargaining chips a union has.

    In addition, unions try to get the very best healthcare, beyond what an employer would consider reasonable, for their clients. With Obamacare now taxing “Cadillac” plans, this also is problematic for unions. Now unions can’t get the best possible healthcare because they are penalized, and they can’t fight for basic healthcare, because it is mandated.

    Unions are becoming obsolete. 50 years ago they represented 50% of the US workforce; today they represent less than 10%. Sure they back Democratic candidates, but that’s because Republicans have not been shy about their opposition and desire to crush even the mention of unions.

    The unions tolerate Obama and the history between the two has not been exactly warm. Right after Obama was elected he passed the “Race to the Top” legislation which pretty much took a bat to knees of teacher’s unions across the country. Information is the greatest threat to the survival of unions. With the power of social media and internet, employees know what their value is and have access to tools that make them more competitive for employment.

    You comment about the congressional office tweak is also misleading. The Chuck Grassley amendment was put into the bill daring Democrats to participate in the exchanges they were supporting and eliminate their current government funded insurance. They had no problem with that. However, in doing so the staffers, some of which make 20-30k a year, were adversely impacted because the amendment took away their benefits which was not the intent. They have now given back congressional healthcare benefits, with the caveat that the benefit offsets Congresses participation in the exchanges. So – all congress will still be required to use Obamacare, but maintain employer subsidized the cost.

    1. Matthew, perhaps private sector labor unions are experiencing some obsolescence, but public sector unions not so much. But even if so, that does not explain away their opposition to this legislation and the huge appearance of special treatment given another Democrat constituency. I hope that you are correct regarding Congress but I still suspect that they will somehow find a way to exempt themselves from the full monty of ACA.

  5. Marcy, I am a small (very small) business co-owner of a family business and have no insurance through my work. I have to get it like anyone else that does not have an employer sponsored plan available. I see nothing, absolutely nothing, happening as the deadline rolls closer, that has me comfortable that ACA will make healthcare more affordable. Actually just the opposite seems much more likely which is what I believe Rick is saying. Rob, since I don’t know you I must ask, you are kidding, right? No matter your political orientation, right, left middle, to suggest that you have God on your side of a political debate means you have lost before you start.

    I return to the question, when so many of those in government or private labor unions, always a huge proponent and supporter of Democrat and left leaning politics, wants nothing to do with this legislation, who should be for it? Just last week Congress had to tweak this legislation so that congressional staff could afford it and yet we are still to believe that this legislation is good for the American public. Show me politics is screaming too loudly for me to hear and understand the benefits the ACA will really provide.

    1. Ok, I’ll just say I’m comfortable supporting the law because it’s consistent with Christ’s teachings and would challenge anyone to explain otherwise. It seems interesting that someone that sounds like a conservative would guide against using religious arguments in political debates.

      On the issues raised like cost. Good news is the national ObamaCares site is working as of a week or so ago. In just a couple steps you can get a quote for family insurance through the state-run health insurance exchanges. We currently pay $300/month for basic family coverage (BlueCross). Using

      we can find a plan for our area that ranges from $240-350 a month. I’d challenge skeptics to use the site above and post their numbers.

      The whole idea of a health insurance marketplace is a conservative idea, literally. Orin Hatch suggested this approach in July 2009 as health care became a priority. Mitt Romney urged the President to adopt his Mass plan in a editorial that same summer. If these ideas were so poorly constructed, why did Republicans push the President so hard to drop a single payer idea for thier free market plan?

      Mitt’s own words

      “Health care is simply too important to the economy, to employment and to America’s families to be larded up and rushed through on an artificial deadline. There’s a better way. And the lessons we learned in Massachusetts could help Washington find it.”

      “No other state has made as much progress in covering their uninsured as Massachusetts. The bill that made it happen wasn’t a rush job. Shortly after becoming governor, I worked in a bipartisan fashion with Democrats to insure all our citizens. It took almost two years to find a solution. When we did, it passed the 200-member legislature with only two dissenting votes. It had the support of the business community, the hospital sector and insurers. For health care reform to succeed in Washington, the president must finally do what he promised during the campaign: Work with Republicans as well as Democrats.

      Massachusetts also proved that you don’t need government insurance. Our citizens purchase private, free-market medical insurance. There is no “public option.” With more than 1,300 health insurance companies, a federal government insurance company isn’t necessary. It would inevitably lead to massive taxpayer subsidies, to lobbyist-inspired coverage mandates and to the liberals’ dream: a European-style single-payer system. To find common ground with skeptical Republicans and conservative Democrats, the president will have to jettison left-wing ideology for practicality and dump the public option.”

      1. Rob, I accept your challenge about Obamacare being “consistent with Christ’s teachings.” But before I can explain otherwise, I need to see your explanation, using the teachings of Christ in the Bible, to show it’s consistent. I look forward to your explanation.

        Secondly, you said this: “The whole idea of a health insurance marketplace is a conservative idea”. As always, we must define terms. By using the term “marketplace” are you (and the writers of Obamacare), claiming that it is indeed, a place for the free exchange of products, with open competition and no forced participation? I think not. No mater what deceptive words you use (like “affordable care act” it doesn’t change what it is. Remember the old “lipstic on a pig” addage? Government control of economic decisions isn’t a true marketplace. Freedom works, compulsion corrodes.

        And the labels, “conservative, “liberal”, and the like don’t work well because most people don’t fit into one or ther other, even if we can agree on their definitions, which we can’t. Either a law promotes freedom or it restricts it.

  6. Thanks got the clear and concise overview! I think my father, who died at 49 from kidney failure, would be alive today if he lived in a country that understood the benefits, individual and national, of providing basic preventative care for its people. He was unemployed, sur to his illness, no insurance, and hopped around from emergency room to emergency room. He died in a facility that they moved him out of because he was costing the hospital too much. I know there are many many other families that have experienced the helplessness that we did.

    1. A question for MAtthew and everyone: What about the many new taxes that are included in the bill? I noticed that your explanation didn’t include them.

  7. I wrote about penalties for businesses that do not comply and tax penalties for individuals that do not buy policies. There will also be a 2% payroll tax on households making over $250K a year. There are several other taxes levied at industry, which might be passsed through in higher prices — but these are borderline negligable. There is also a cap on FSA @ $2500, but this is not a tax so much as a reduced tax break.

    The full list of all the taxes are found here:

    Taxes should have minimal to no impact for 98% of the population.

    1. Thanks, Matthew. I would hardly use the word “negligible” when we are talking about tax hikes of about $173 Billion dollars, which will be taken out of the economy. Talk about job killing! Here’s a list of the different tax hikes in the bill:
      $0.4Billion: Blue Cross/BlueShield tax hike
      $0.6 Billion: $500,000 executive compensastion limit for health insurance execx
      $1.4 Billion: HSA withdrawal tax hike
      $2.7 Billion: Tax on indoor tanning services
      $4.5 Billion: Codification of the “economic substance doctrine”
      $4.5 Billion: Elimination of employer tax deduction
      $5 Billion: Medicine Cabinet Tax
      $13.2 Billion: FSA account cap
      $15.2 Billion: High Medical Bills Tax
      $20 Billion: Tax on medical device manufacturers
      $22.2 Billion Excise tax on Comprehensive health insurance plans
      $23.6 Billion “Black liquor” tax hike
      $$60.1 Billion: Tax on health insurers


      1. Yes and no. I think negligible is more than fair for the following reasons:

        1. $173 billion looks high, until you realize that you are quoting 10 year numbers, and we spend 2.4 trillion a year in healthcare, and that amount equals 7/10ths of 1% of the total healthcare spend. Also (in a spirit of transparency), I think your numbers are understated, I think the tax number is $569 billion over 10 years according to the CBO (2.4% of the total healthcare spend).

        2. When looking at the negative impact to the economy (via taxes), you also need to take into effect the positive spends as well. When you insure an additional 30MM people, how many more healthcare jobs are created? How can you improve costs through scale? How will the extra dollars in the consumers pockets impact us in other areas? I see this thinking all the time in the immigration debate. People want to point out the economic costs of undocumented workers, but I have yet to see that argument offset by positive building blocks of lower consumer prices and taxes paid (employers still pay payroll taxes on behalf of undocumented workers which are never paid back out – a windfall for the government).

        3. The vast majority of these taxes impact the upper 2% earners. That goes for the mortgage tax you referred which impacts the gain on home sales in excess of $300k (how often are their gains on home sales in that amount?).

        4. According to the CBO, Obamacare actually offsets the annual deficit which means less interest on borrowing money, another positive outlay. If the CBO is right, we will lower our deficit by $1.1 trillion over 10 years, which is $1.1 trillion that will not be passed on to the National Debt, and $1.1 trillion less in borrowed money.

        Again, it is misleading to say that $173 billion ($569B) will be taken out of the economy when the money supply will not be constricted. I do agree that $173 ($569B) billion is a negative building block for consumers as a whole, but to isolate without the full positive implications is misleading. Thinking about this another way, if the full impact of $569B was passed through to consumers, prices would rise 2%. Compare that to the annualized 10-12% per year for the past 15-20 years, and again it is insignificant.

        One more thing, the only non-partisan source we have on these expenditures is the CBO. Here is the link to their updated projections based on the repeal of Obamacare, both of inlays and outlays (Typically these reports are difficult to read and process — but again, given your background in Econ, you should have no problem). Both of our sources use the CBO — so we might as well go to the pure driver of the information.

    2. Oh, and I must ask, how do these additional taxes purport to lower the cost of healthcare? And how do many of possibly pass the test of being germain to the topic of healthcare?
      also..there’s a tax on home mortgages also, is there not?

  8. This long treatise on the virtues of the ACA all sounds very convincing (to the unlearned reader) except for three little problems:
    1. The law is unconstitutional
    2. The law was passed in the middle of the night by a Democrat-controlled Congress under the noses of the American public and virtually NO ONE read it before its passage
    3. Contrary to what Obama promised over and over before it was passed, it will add tens if billions to an already exploding and debilitating federal deficit. (Obama lied)

    I know you won’t likely publish this post because this is not an open forum on which you allow the truth to be debated–you only allow discussion filtered through the lens of liberal ideology.

    1. Hi Kevin. Thanks for reading and commenting. We always try to publish any comment as long as it is civil and does not attack any other poster (outside of respectful debates) regardless of how incorrect the comments are. For example, I might point out that by your comments you probably do not understand the difference between deficit and debt, or challenge that the deficit has been cut in half under Obama, but I would never make a personal attack to you as an individual.

    2. Kevin, I must say that I have been surprised to see that civil disagreement and debate is, in fact, allowed, and it seems to me, encouraged here. I disagree with many of the posts here (the ideas and opinions) but I don’t point my remarks at the person, but rather, the idea. I pretty much agree with you, Kevin. And I have posed some questions for Matthew to verify his sources or back up his statements. And the reply has always been civil and to the point. So let’s join together and see what happens. Specific points of debate should be identified and discussed.

  9. Matthew, what is the ‘explanation’ for the announcements of two big companies this week – UPS and Delta? The first, UPS, is dropping spousal coverage if the spouse can be covered under another plan, and the second Delta, that the implementation of ACA will cost the airline $100 million in INCREASED health care costs. Of course there are others that have preceded these since this post began Aug 4th. The closer we get to 2014 – even though the employer mandate penalties have been postponed – the more we see that what Nancy Pelosi promised (if they passed it then we all could see what was in it) has frighteningly coming too true, except that what we are discovering is the disaster that this legislation is. I hate to see what is coming in the immediate weeks that precede October 1 when the Marketplace Exchanges more fully kick in.

  10. I read that. My understanding is that UPS will be dropping non-unionized spousal coverage who have another option from their employer. What is interesting is most companies already have significant penalties in place before the ACA that discouraged spouses from being covered if they had another option. I have worked for several of the largest companies in the world (Gillette, P&G, Henkel) and most will make the employee pay anywhere between $300-$500 a month in additional premiums to cover their spouse if they have another option. I am sure UPS already has something like this in place so the announcement is probably has minimal impact. Healthcare costs have almost doubled in the last 10-15 years, so this announcement might have been made even without Obamacare.

    As far as Delta is concerned, they are only attributing $38 million in additional costs to Obamacare, the rest is due to inflation. When you read through the details on the $38 million, the expense is EXACTLY what you want to see. What I mean is Delta’s cost will rise because they expect more people will sign up for insurance and they now have to cover their employee’s college kids. So all of these uninsured that would potentially cost taxpayer millions in emergency room costs, is now being shifted back to private industry. Like I called out in my article above, we should not be encouraging government to subsidize private corporation’s benefits. The company said it does not plan to cut workers’ hours to avoid providing healthcare coverage, and that its healthcare plan already meets the law’s coverage requirements.

    Delta also said it does not plan to cut workers’ hours to avoid providing healthcare coverage, and that its healthcare plan already meets Obamacare’s coverage requirements.

    1. Matthew,
      1. sources, my friend, please?
      2. Forcing anyone, individual or business owner, to purchase any product is unconstitutional slavery.
      3. Forcing anyone, individual or business owner, to produce and offer any product or service, when it guarantees the cost is more than the revenue, ie. insuring preexisting conditions, or forcing them to carry dependents until they are 26 (and should be working and on their own by then) is unconstitutional and a violation of property and liberty.

      I must insist that this point is the crux of the matter. Even if Obamacare were “magic” like Nancy Pelosi wishes to believe, there is no authorization in the Constitution for the use of force in the economic arena. Could you respond to my assertion?

      4. “…$38 million, the expense is EXACTLY what you want to see.” Who is the “you” to which you refer? Certainly not me, or Jay. Are you the “you”?
      5. How do taxpayers end up paying for emergency foom costs of a private hospital?

    2. Matthew, could you also address the issue of the economic costs of illegal immigration on our healthcare system?

      1. What sources are needed here? I was repeating the statements by UPS and Delta.

        Here is The Hill’s article on Delta:

        Here is the USA Today’s article on UPS:

        I wrote about the impact of immigration on our economic system here (including healthcare). If you have any immigration specific comments please address them under that article so we can keep the subjects apart.

        Government pays uninsured costs billed through the Medicaid system. I would venture to guess that if an uninsured person walks into a privately held hospital without insurance, they would most likely be denied healthcare if there was no backing from the govt.

        There will be some small businesses that will cut employment to get under the 50 person threshold, I have not denied that. We also had a conversation earlier on exactly how many small businesses this will impact (less than 90%). But like I point out several times before, you need to look at the full “balance sheet”. How many more small businesses under Obamacare can be competitive with benefits? How many more jobs will be created by expanding insurance to 30-40MM individuals. How much will we save in taxes over the long run shifting government entitlements to private industry. By now you should know that I like the big picture. These anecdotal examples do not tell the entire story.

        I think your emotionally charged statement of “unconstitutional slavery” is based off of biased interpretation (I guess the same could be said of me). This is the crux of the entire debate. As a tax payer you are already forced to cover the uninsured. You are also forced to cover entitlements that subsidize business (like the Walmart example in my Obamacare article). Medicare costs are going through the roof mainly because preventative medicine is not available broadly; which you end up paying. The irony is, no matter how mad you are at Obamacare shifting costs to private industry, the government and taxpayers will benefit from lower expenditures.

        Let me pose a question to you…
        You say forcing business to provide healthcare is “unconstitutional slavery”. But the businesses primarily impacted by this statement are the ones who exploit the system to offset their bottom line. Are you OK with any company (with more than 50 employees) unwilling to cover their employees’ healthcare needs, instead expecting them to use emergency rooms, medicaid, and eventually Medicare which are then billed to taxpayers?

        1. Thanks for the continued discussion, Matthew. I have taken quotes from your last post, and inserted my responses thereafter.
          But first of all, I must ask you this. America is a land of principles, Constitutional principles. The principles (the foundation of our prosperous society, blessed by God, as long as we are righteous) must be adhered to. So: Can you show me in the Constitution, or the writings of the Founders where there is authorization, or even support for taking property (money, earnings, taxes) from one person by force and giving it to someone else who did not earn it? Free agency is the greatest gift we have been given by heavenly Father. If I as an individual could not collect by force money to help another person, then how does the representative I elect have that power?
          Now to your post:
          “ How many more small businesses under Obamacare can be competitive with benefits? How many more jobs will be created by expanding insurance to 30-40MM individuals. How much will we save in taxes over the long run shifting government entitlements to private industry. By now you should know that I like the big picture. These anecdotal examples do not tell the entire story.”
          Job creation goes along with wealth creation. Government cannot create wealth, or jobs. Adding 30-40MM individuals previously not covered will add that much to the cost of covering them, without adding a single dime in wealth to pay for it. Somebody has to pay.
          “1. Nothing in our material world can come from nowhere, nor can it be free; everything in our economic life has a source, a destination and a cost that must be paid – by someone.
          2. Government is never a source of goods. Everything produced is produced by the people, and everything that government gives to the people, it must first take from the people.” (From Ten Pillars of Economic Wisdom, [Fred G Clark and Richard Stanton Rimanoczy ]
          The real question on saving money in taxes should be this: How much money will we save in taxes over the long run if we eliminate unconstitutional government entitlements instead of shifting them to private industry?
          That’s the big picture.

          “Government pays uninsured costs billed through the Medicaid system. I would venture to guess that if an uninsured person walks into a privately held hospital without insurance, they would most likely be denied healthcare if there was no backing from the govt.”
          Agreed, totally. The problem is, however, that Medicaid, Medicare, AFDC, WIC, and the rest of the acronym jungle all are violations of liberty and property, as Bastiat aptly stated. They are, in his words, “legal plunder”. “But how is this legal plunder to be identified? Quite simply. See if the law takes from some persons what belongs to them, and gives it to other persons to whom it does not belong. See if the law benefits one citizen at the expense of another by doing what the citizen himself cannot do without committing a crime.”
          One who is content to gloss over this pivotal principle, and endorse compulsion, has, in my estimation turned 180 degrees from the foundation upon which our nation was built.
          “ As a tax payer you are already forced to cover the uninsured. You are also forced to cover entitlements that subsidize business (like the Walmart example in my Obamacare article). Medicare costs are going through the roof mainly because preventative medicine is not available broadly; which you end up paying. The irony is, no matter how mad you are at Obamacare shifting costs to private industry, the government and taxpayers will benefit from lower expenditures.”
          Whether there will be lower expenditures is certainly open for debate, to say the least. But your words seem to leave only one solution: Embrace the forcible shifting of costs to private industry. This is also unconstitutional. But even if it weren’t, there is another option. Get rid of our socialistic welfare system, which is has failed everywhere it has been tried, and eliminate all the taxes extracted from private industry, returning trillions back to the pockets of those who earned it. This will also eliminate the hundreds of billions in fraud and waste, and the reprehensible situation we now have whereby our entitlement system now offers a higher standard of living that an entry level job, and where millions are trapped on the welfare plantation. I urge you to watch the new movie: “Runaway Slave”.

          Then see what the people will do with their own money. We could then be much less influenced by “stupid greed and false philanthropy” as Bastiat calls them.
          “You say forcing business to provide healthcare is “unconstitutional slavery”. But the businesses primarily impacted by this statement are the ones who exploit the system to offset their bottom line. Are you OK with any company (with more than 50 employees) unwilling to cover their employees’ healthcare needs, instead expecting them to use emergency rooms, medicaid, and eventually Medicare which are then billed to taxpayers?”
          I see no evidence for your second statement. Besides, it’s not for anyone to judge what helps the bottom line in another’s business. Loyal and well-paid employees work harder and help to shore up the bottom line also, so that’s an incentive for employers. Free from government coercion, individuals and societies tend to prosper in a system of spontaneous order, and Adam Smith’s “invisible hand” works wonders. History has proved it. Employees have a choice where they work. Competition for employees is the incentive for employers to give them pay and benefits that will attract the best ones. The question is, are these employers you refer to “unwilling to cover their employees’ healthcare needs” or unable due to the costs of government meddling and regulations?

          Force has never brought freedom, prosperity and peace, and it never will.

  11. Thanks Matt,
    I believe this is going to be judged properly, only as it is increasingly enacted and operated starting in October. All the naysayers will be proven right or wrong. As a healthcare professional, married to a pharmacist, and as operators of a pharmacy, we stand on the front lines. Attended a workshop earlier in the month on it, and didn’t gain much more knowledge than reading thru this article. Sen Grassley, dared the dems, and he lost. Besides his nonsense about grandma and death panels, which added fuel to the fire in 2009. We will just have to wait and see how this legislation affects all of us.

  12. У нас совсем другие люди в Белоруссии, но насколько Вы живо обсуждаете каждую проблему, как Вам все важно, как бы сказать Бог дал вам Жизнь и Вы живы даже при закрытых у нас политических обсуждениях – тут же дело о здоровье каждого – нельзя быть равнодушными! И важно, что есть мнения. Как сказал один философ: в споре рождается истина, но она рождается в дебатах

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