Wednesday, December 12, 2012

How much does the ACA Cost?

How much does the ACA cost?
Two years ago, the PPACA (Patient Protection Affordable Care Act) or AKA Obamacare was passed.  There was a huge bipartisan divide over that issue over the past few years.  After braving the threat of the supreme court decision and the 2012 election, the ACA is here to stay.  For this post, I'll focus on the cost of it.  The Republicans say it is too costly and is not affordable like it says in the name.  Democrats believe the changes made in the ACA will balance each other out.  So who is right?  The honest answer is nobody really knows, but I will get into the reasoning for both sides.  I will be only covering the Medicaid expansion portion of the ACA, but there are many more important components to the ACA.

Republican View
The ACA is mostly dependent on the expansion of Medicaid (poor people insurance).  More people will be eligible for Medicaid and that will obviously cost more.  Also, there is already a safety net to protect those in the time of need (the ER for life-threatening situations).

Democrats View
The Democrats party's view is that the ACA is actually balanced out in its cost.  There are cost deductions from increased taxes and reduced payouts in Medicare (old people insurance) that balance it out.  Having insurance is much better than not having insurance.  The safety net does not do enough.

Majors points of Republicans and counter points

1) More Eligibility in Medicaid (Medicaid Expansion): More people will be eligible for Medicaid, so it will cost more money, a lot more money!
Counter point: With cuts in the cost of Medicare (old people insurance) and increased taxes on various health care spending like taxes on higher income insurance holders, it will be balanced out.  The CBO projects that the cost will be balanced overtime as shown in this beautiful chart!

But the projection really is up in the air.  It depends on the projections based on the number of predicted enrollees and the average cost per enrollees, which could greatly change the predicted cost.  At least so far according to the great minds at the CBO, the cost should be balanced out.  But they could be wrong!

Also, most of the current Medicaid spending is for the disabled and elderly.  They make up 28% of those on Medicaid while spending 66% of the total cost.  Most new medicaid enrollees from the ACA will be parents and and in general healthier (and definitely not old people).  So some people may use current average medicaid spending to predict the cost which is definitely incorrect.

2) Medicaid is increasing rapidly in cost: In general healthcare costs are taking an increasingly larger percent of our GDP every year.  Medicaid was already a costly program that cannot stay in its current state.  The ACA makes it even worse by covering more people.

Counter Point: There really is not one.  This is actually a very true issue.  Medicaid and Medicare will keep on increasing in cost to the point where we may no longer be able to afford it if it is not changed.  The ACA does have a few cost cutting experiments (like ACO!) that may cut the cost.  And technically the ACA should balance itself out, so it would not have changed the status quo of impending doom (or at least not having it come quickly).  There definitely needs to be more change in the future!

So ... yeah... nobody can be sure of what the actual cost is going to be.  If it helps you feel any better, CBO says it will be okay.  But even if that is the case, we still have to worry about the impending doom of the Medicaid program.  Although, I believe that is more due to the increasing cost of the healthcare system in general.

But further questions to consider are...

  • Is covering all the new uninsured worth it?
  • Is making people buy insurance necessary?
Until next time!

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