A View On Affordable Care Act In USA

“America’s health care system is neither healthy, caring, nor a system” Walter Cronkite

Introduction

The United States may be known for doing many things well. From Hollywood films to aircraft carriers, America has a history of dominating the world in many areas. However, healthcare is not one of those areas. It is no secret that the United States struggles when it comes to privatized healthcare, and has even struggled since the introduction of the Affordable Care Act and its associated public plans. Despite efforts toward overhauling the healthcare system in America, Walter Cronkite’s point remains valid – the system is ailing, and the ACA has had only a small impact.

The ACA (also known by its more derogatory name, “Obamacare”) is far more than a controversial issue; it has all but completely divided the country. This short discussion paper attempts to take the politically polarizing topic of the ACA and address it from a more objective, economic perspective. More specifically, the paper examines the ACA from a macroeconomic perspective, looking to both its benefits (‘pros’) and detriments (‘cons’) in terms of economic development, stability, and growth. It is not the point of this paper is not to make an argument either for or against the ACA and its subsequent policies. Instead, the paper is designed to put an objective spin on an otherwise divisive issue, discussing both how it has benefitted the country and the potential it has for economic detriment. The paper begins with a brief overview of the history of “Obamacare” in order to provide perspective, and then discusses both the pros and cons of the law in turn. Finally, the paper concludes with an overview of why this topic is important to macroeconomics.

Background

The Patient Protection and Affordable Care Act (ACA) was signed as a law in 2010, and signaled one of the biggest changes in the US healthcare system in decades. The law was developed in the House of Representatives by the Democratic majority, and passed into law through much controversy in both the House of Representatives and the Senate (eHealth n.p.). Just before the legislation was passed, opinion regarding the law around the country showed “Americans were skeptical that the new law would reduce the cost of insurance” but that “most Americans supported the concept of exchanges and ways to compare prices online” (eHealth n.p.).

However, individual pricing of healthcare plans is largely a microeconomic question; that is, it asks how American families pay for services like healthcare, what prices they are willing to pay, and how insurance should be priced in the first place. This discussion paper is concerned with the macroeconomic impact of the ACA – that is, how the law changed the United States economy as a whole. Because the country is only six years out from the time the law was passed, this may be a difficult question to answer – particularly considering how divisive the legislation has been. It is difficult to find a purely unbiased academic discussion of this topic, and for this reason the paper attempts to balance the discussion by turning to both conservative and progressive sources.

Macroeconomic Benefits of the ACA

The very first thing that must be said in terms of the macroeconomic benefits of the ACA is that the overall economic impact of the ACA is – and cannot be – a ‘make it’ or ‘break it’ development for the American economy. In other words, the ACA is not going to create a recession as was seen in 2008, nor could it skyrocket productivity and GDP growth for the country. As one source states, “The possible impacts – positive or negative – of the ACA are small compared to recession-creating events such as the Lehman collapse, the bursting of the stock market bubble in 2001, or the rise in oil prices in 1973” (Bachman n.p.). That said, the ACA certainly can have an economic impact – particularly a macroeconomic impact. More specifically, the ACA can affect (and has affected) GDP growth. As the same source goes on to state, the ACA can “increase GDP growth by reducing labor costs, if it succeeds in improving innovation and productivity growth in the health care sector” and increase GDP growth “in the short run by increasing the demand for health care goods and services” (Bachman n.p.).

In other words, the ACA has ostensibly created GDP growth both because it has increased the demand for health insurance (since that is a requirement of the law) and because it has purportedly made the sector more productive. According to the White House, the legislation has also driven macroeconomic growth in a more general way: “Economic research demonstrates clearly that this expansion in coverage is generating major benefits for the newly insured by increasing access to needed care, improving health, and enhancing families’ financial security” (n.p.). In other words, the ACA benefits the economy because it allows Americans to both earn more and spend more, both of which drives GDP growth.

Macroeconomic Detriments of the ACA

In contrast, many conservatives are concerned not only with the political implications of the ACA, but also the economic ramifications of the policy. The biggest concern, and potential economic detriment, of the ACA is that it will increase rather than decrease the national debt. The second, interrelated concern is the economic burden it will place on American companies and families. As the Heritage Foundation states, “The bill’s taxes, penalties, and fees on investors and businesses will decrease the amount of investment in the economy,” which will in turn ostensibly lead to a decline productivity, which will finally result in higher interest rates on the national debt (Campbell n.p.).

As the report goes on to state, “Higher interest rates mean that more American tax dollars will go toward paying the interest on the federal debt rather than paying down the principal” (Campbell n.p.). This concern is substantiated by the fact that, in 2014, the GDP grew by only 0.1% in the first quarter, while health spending had grown by nearly 10% (Campbell n.p.). In short, the potentially detrimental impacts of the ACA are two-fold: first, that the law penalizes job creators (that is, American companies), and second, that the law diverts tax payer money away from paying down the national debt, which arguably will stifle growth.

Conclusion

The above discussion of both the pros and cons of the Affordable Care Act (at least from an economic point of view) makes it clear that the topic is certainly relevant to macroeconomics, and vice versa. Macroeconomic policies can directly impact healthcare systems, and healthcare reform can directly impact macroeconomic realities for a nation. As the International Monetary Fund (IMF) states in a report: “Macroeconomic guidelines relation to public expenditure targets, inflation control, tax policy, and exchange rates will have effects on the provision of health care and ultimately on the health status of the population” (n.p.).

While this is primarily in relation to development, the main point remains clear: health care policy is not an isolated public decision. Instead, policies like the ACA have direct economic implications. The discussion above may not make a specific argument for or against the policy, but has certainly show that any political or even personal views on policy should be made with macroeconomic principles and a macroeconomic future in mind.