Any type of major reform at the national level is bound to cost something. The implementation of the Affordable Care Act (ACA), or Obamacare, is no exception. One of the major goals of the law is to regulate the healthcare industry over time. It provided affordable coverage options for U.S. citizens. Additionally it curbed healthcare costs overall to recoup initial costs, and eventually see returns due to cost reduction.
In other words, proponents of the ACA claimed that in time, it would pay for itself and more. There are costs for setting up the health insurance marketplace, expanding Medicare, Medicaid, and CHIP coverage. That is in addition to offering assistance to low-income individuals and families with marketplace subsidies, and offering employer tax credits. However, some people questioned how, exactly, Obamacare can keep the promise of recouping expenses anticipated to number in the trillions of dollars.
Will Obamacare pay for itself? If so, how will this be accomplished? Here are a few things you need to know about the projected costs and financial benefits related to Obamacare.
Anticipated Expense
The projected costs associated with implementing Obamacare were to reach $1.207 trillion by 2025. This is per 2015 reports issued by the Congressional Budget Office, or CBO. This figure takes into account the actual costs. That includes implementation of state health exchanges, expansion of Medicare, Medicaid, and CHIP programs. Additionally, it’s comprised of subsidies that provide assistance through the health insurance marketplace, employer tax credits, and so on.
The figure does account for certain anticipated revenue, as well, including taxes and penalty payments. Consequently, it does not include other expected returns, such as reduction in the costs of healthcare, reduction in Medicare spending, or the burden of healthcare for uninsured patients unable to pay for emergency medical care.
2015 saw the lowest increase to healthcare spending in the U.S. since 1960. The inflation rate for health care pricing was at its lowest in fifty years. This was largely due to Obamacare’s implementation. However, these numbers are not reflected in the overall cost projections for the ACA through 2025.
The cost for implementing Obamacare may well reach over a trillion dollars by 2025. That does not necessarily indicate an overall deficit. What about anticipated gains during that time? How will the provisions set forth in the ACA combat these costs and ultimately result in a plan that pays for itself and then some?
Preventive Care
It is true that Obamacare has provided low-cost plans to millions of Americans. It has partially done so by spending on subsidies providing assistance to low-income individuals and families, as well as other needy groups. This is in addition to expanding Medicare, Medicaid, and CHIP coverage. So far, this all sounds expensive.
However, there is a lot gained by providing every U.S. citizen with health coverage that includes access to preventive care. Consider, for a moment, what it means to spot a case of diabetes or heart disease in the formative stages versus when the condition has become severe.
A patient who has pre-diabetic symptoms or high cholesterol needs advice from a family physician about how to diet, exercise, and perhaps start a regimen of prescription medication to curb health problems before they become serious. Without health insurance that offers preventive care, a patient might not know there is a problem until a diabetic coma or a heart attack results in an emergency room visit and thousands of dollars of emergency care.
What about those with pre-existing conditions denied healthcare coverage prior to the passage of Obamacare? Without health insurance, and who will pay for emergency care for the uninsured. If they cannot afford health insurance, how can they afford outrageous medical costs?
There were two ways to convert the costs. Hospitals charged insured patients more to cover the costs of the uninsured. This, in turn, led to rising rates for premiums being passed along to consumers who did have insurance.
Taxpayer dollars were also used to pay for government healthcare programs for the lowest-income individuals. Yet because some programs did not cover preventive care, the vicious cycle of rising costs was never-ending.
In short, the preventive care provided to all Americans as part of mandatory minimum standards spelled out in Obamacare could reduce the overall costs of healthcare significantly. This can help pay for the law through reduced spending over time.
Healthcare Regulation
Another aspect of Obamacare aimed at cost reduction is healthcare regulation. The law seeks to regulate not only the costs and standards for health insurance coverage but also the costs and quality of healthcare in general.
For example, government-sponsored programs like Medicare and Medicaid can refuse payment to healthcare providers in certain circumstances where care is subpar. If a patient is released from the hospital and no follow-up care is offered, it results in further illness or injury and the need for additional care, later on, the original healthcare provider may be denied payment for services.
As for the health insurance marketplace, or the state exchanges, they regulate costs for coverage and are subsidized to make sure that all Americans have access to affordable rates for coverage. Insurance providers should provide competitive rates while meeting mandatory minimum standards for coverage through the marketplace.
With all Americans now required to purchase insurance, providers that participate in the marketplace can compete for new customers. Additionally, those with low-income will receive government subsidies for care, ensuring that insurance providers are not losing money.
Deficit Reduction
The growing cost of healthcare is due to many factors. These include inflation, new and costly technological and pharmaceutical advances, increased illness, the aging Baby Boomer generation, and a fee-for-service mentality. This rewards unnecessary tests and procedures. Obamacare seeks to reduce costs at every level, for providers, insurers, and patients alike.
When there is a reduction in overall healthcare spending, Obamacare will begin to pay for its initial startup expense. In turn, it stands to begin reducing the deficit. It is still difficult to estimate how such changes will impact the national debt, but time will tell.
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