The (Un)Affordable Care Act

CaduceusNoEven without electronic amplification, the rhetoric arising from debate over the Affordable Care Act (ACA) is as deafening as the guitar riffs at heavy metal rock concert. As debate rages on about the potential benefits and liabilities of the program, its legality — or lack thereof — and the taxes and penalties buried within the 2,000+ page legislation, the unfiltered noise is drawing attention away from fiscal consequences that will affect virtually every person in the country.

Proponents sing its glory and detractors label it a train wreck, yet the ACA remains only partially exposed. In spite of its obvious flaws, it will be neither as bad nor as good as claimed. In fact, no one will know its ultimate impact until it is fully implemented. That isn’t to say that it should be implemented in its existing form, only that current dialogue is based on projections, not hard data.

However, much of that dialogue ignores financial reality, which is one of the primary sticking points for opponents of the act. It is impossible for a program to provide health insurance to the 30+ million people who currently can’t afford — or won’t pay — existing rates without incurring considerable expense.

In addition to mandating certain rates, coverage and costs, the ACA provides a mechanism for virtually any marketplace applicant to receive “federal assistance,” which will be funded by tax revenues in one form or another. Even if only one-third of the people currently without insurance receive federal assistance, the cost to provide such assistance will amount to over $15 billion a year. (With federal assistance ranging from $3,000 to $10,000 for a middle-aged man, even if you reduce the low end figure by half, 1,500 x 10,000,000 equals $15 billion.)

Forcing insurance companies to accept applicants with pre-existing conditions is another cost-increasing aspect of the act. Denial of coverage because of a pre-existing condition may tug at the emotions and seem cold-hearted, but its basis is economic.

Like all forms of insurance, health insurance rates are fundamentally based on revenue and expenses. People who do not have health insurance do not contribute to the revenue pool, but do increase expense. That is analogous to having the ability to withdraw money from a bank account without having made any deposits.

Proponents claim that any funding of the program through tax receipts or increased insurance premiums is economically justified because it will eliminate the occurrence of uninsured people making emergency room visits and being treated free of charge. Such a theory has some validity, yet the reality may be far different, depending on the number of uninsured Americans who purchase insurance, and the level of coverage they select.

Even after the ACA is fully implemented, uncharged emergency room treatment will continue to have a significant economic impact.

As a result of the various financial demands created by the ACA, insurance rates can move in only one direction: up. Although some individuals and small companies may see some cost reductions, if you “do the math,” lower rates will be anomalies.

Consider this: the same number of people who are currently insured will provide the bulk of the revenue to cover all expenses. Members of the 30-million person group currently without health insurance will almost certainly purchase through the exchanges, and overall will contribute less in revenue than they receive in benefits. (That’s not an indictment of people currently without health insurance. It simply stands to reason that many members of this group have not had the medical attention they need because they couldn’t afford the out-of-pocket cost. After they have insurance, they will make use of it.)

The ACA’s fundamental flaw is its financial dishonesty.That flaw was clearly designed into its foundation to serve as a transition to a single-payer health care system, which appears to be the end game. The ACA is simply first-step legislation in the transition to a Medicare-type universal health care system.


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