Ask Stacy: Isn’t Obamacare Going to Wreck the Economy?
This week I’m taking two questions, both about the Affordable Care Act. The first is about the “ripple effects” of diverting money from consumer spending to health insurance. The second is about the affordability of health insurance under the new law.
Here’s the first one:
Could you comment on the effect of Obamacare on the economy? For example, if I have to buy health insurance (or be fined) I neither need or want, I expect that I will not be able to buy some of the things I do need – food, gas, school clothes and supplies, etc., etc. My insurance money will NOT be put into the economy but given to the insurance company. Companies that rely on my spending (and millions like me) will either close or lay off people (a huge loss of jobs?). There may be many other factors to consider as well. The ripple effect will be — what? – Larry
Why Obamacare made health insurance mandatory
To answer Larry’s question, here’s a simple example of the way the health care system worked prior to passage of the Affordable Care Act, also known as Obamacare.
- Larry doesn’t buy health insurance, because he neither needs nor wants it and he’d rather help the economy by spending his money on other things.
- One day, Larry wakes up unable to properly breathe. He goes to the emergency room, where he soon discovers he needs triple bypass surgery.
- Larry is admitted to the hospital and the $200,000 surgery is performed.
- Larry can’t begin to afford this bill, so he declares bankruptcy. The hospital loses $200,000.
- To recoup the loss the hospital suffers because of Larry and others like him, it raises all its rates.
- Since the hospital is now charging more, the price of insurance goes up.
- Because Larry didn’t pay his hospital bill, his fellow citizens indirectly pay it for him.
This is the simple logic behind the Affordable Care Act. The reason this law exists is to make sure as many people as possible have health insurance. Other than letting those without resources die, it’s the only way to prevent your fellow citizens from paying for your health care.
Nobody likes paying big bucks for insurance, Larry, and every premium we pay diverts money from other parts of our economy. Whether it’s car, home or health insurance, we can all think of things we’d rather spend money on. Until, that is, we wreck our car, our house burns down, or we need a triple bypass.
The difference is, your wrecked car and burned house don’t cost me anything. Your triple bypass does. So unless you’re OK with either 1) dying if you can’t afford to get sick or 2) forcing the rest of us to spend our hard-earned money to pay for your health care, get some insurance.
For more on this topic, check out ”Americans Don’t Want Health Insurance? Since When?”
Falling through the doughnut hole
Now, here’s our second question, also relating to the Affordable Care Act:
I do not understand the affordable part of Obamacare. I am sure you have had other people complaining about this problem. I am currently only making just under $10,000 per year, I am a Florida resident so I do not qualify for Medicaid (single male). When I completed my application on Healthcare.gov, it says I will pay between $500 and $600 a month for insurance. I do not see anywhere that shows any type of reduction. Someone told me you receive the reduction as a tax credit. Duh, at my income I pay little tax. Where do they expect me to get the money in the beginning if this is so? I guess I will take the penalty. – Robert
When I first read Robert’s question, I assumed he was mistaken. After all, thanks to the Affordable Care Act, those who can’t afford health insurance will either qualify for Medicaid or get a subsidy to help pay for insurance on the exchange.
But it was me who was mistaken.
Robert and I both live in Florida, one of 23 states that have refused to expand Medicaid to cover people like him.