Economic Impact of Affordable Care Act Essay

Impact of the Affordable Care Act† The current healthcare system over burdens the economy and is far too costly in comparison to the health benefits it delivers. The United States spends about 50 percent more on healthcare than any other developed country (as a fraction of our total national economy) and we get less for it on what matters. The human capital required to obtain these services leaves many Americans doing without or not receiving the medical treatment required. The Affordable Care Act may be the most controversial legislation in the modern era. It is marketed as healthcare expansion to about thirty million more Americans. The ACA is also designed to do away with some of the unfair elements of the current system. Health insurers currently are able to deny people coverage for â€Å"pre-existing conditions† which makes out of pocket costs out of reach for most Americans. As with any piece of federal lawmaking, the ACA was the product of political compromise among parties and interests. (Turner) However, the ACA should help to improve the GDP in the long run. In the short term period, the increase in economic security for American families will also mean an increase in consumer spending. Many uninsured consumers are forced to set aside money in low interest liquid accounts to make sure they have enough to cover unexpected medical costs. With the security provided by health insurance, they can free that money up for consumption that is much more valuable to them. When the federal government expanded Medicaid in the 1990s, the newly insured significantly increased their spending on consumer goods. (Brodwin) More purchases of consumer goods will provide short-run stimulation to the economy and more hiring. Opponents of the act have countered this theory saying it will freeze hiring in some industries. Some employers may resist hiring new workers, at least partly to avoid the high costs of the law’s mandated health coverage. The health law will require all employers with more than 50 workers to provide health insurance or pay a fine of $2,000 to $3,000 per worker every year. (Yoo) These added costs could result in companies losing the money needed to grow their businesses and hire new workers. It is feared that small business, usually the nation’s most robust job creators, will be hit hardest and many say the requirement would wipe out their profits. It is alleged that the â€Å"slow down† in hiring has already begin in  anticipation of the ACA. The total cost for healthcare in the US is around 16 percent of Gross Domestic Product, known as GDP. What we pay to doctors and insurance companies directly are included in this, as well as what we pay indirectly to Medicare and other programs. 16 cents of every dollar spent on groceries or clothes that will go to he althcare. This is very high in comparison to most other developed countries that pay between 9-12 percent of GDP. The difference in GDP is almost 5 percent, which works out to be more than half the annual federal deficit. The biggest fear associated to the Affordable Care Act is likely about the financing and â€Å"job-killing taxes†. There are three primary sources that the law applies new taxes to. The first is on parts of the health care industry like medical devices, pharmaceuticals, and insurance. (Turner) These areas that are receiving a new tax are being asked to â€Å"kick back† some of the newly created revenue resulted from an increase in paying customers provided by the law. These sectors should benefit on net in a large way. The second is an extension of the Medicare tax on the wealthiest Americans, those with incomes above $250,000 per year. The impact of tax changes on the highest income taxpayers will avoid some of those taxes by re-categorizing their incomes in ways that minimize taxes. There is nothing that suggests that the upper class will actually work less, invest less, or do anything which reduces their â€Å"real contribution† to the economy. The third major tax provision is a â€Å"free rider penalty† of $2000 to $3000 (per employee) on medium and large businesses that fail to provide workers with affordable coverage, forcing those workers to get subsidized insurance via the new insurance exchanges. This will indeed impose a new financial burden on businesses that, unlike competitors, do not pay their fair share of health insurance costs. But the overall impact is likely to be very small. Only 2. 6 percent of businesses will pay this assessment, and the revenue raised will amount to 1. 4 percent of existing spending on health insurance in the U. S. and only 0. 1 percent of wages. ( Turner) The ACA should raise employment numbers for the medical industry in the short run, more than any partial offsets from new taxes on that sector. The ACA should improve the functioning of our labor market in the medium run, by allowing workers to move to the positions in which they are most productive and satisfied without fear of job lock or losing health benefits. The â€Å"economic slowdown† from taxes on the upper class or the small equity payments imposed on employers should be minimal. In the long run there is a good chance the economy will improve by controlling health care cost. The choice between protecting our most vulnerable citizens and improving our economy is a false one. The ACA should do both. Works Cited Brodwin, David. â€Å"How the Affordable Care Act Helps the U. S. Economy. † US News. U. S. News & World Report, 29 Mar. 2012. Web. 03 Mar. 2013. Turner, Grace M. â€Å"Pro&Con: Affordable Care Act Will Impose New Burdens on Consumers, Businesses. † SouthCoastToday. com. N. p. , 02 Mar. 2013. Web. 03 Mar. 2013. Yoo, Saerom. â€Å"Mid-Valley Social Services. † MidValley Social Services Economic Effect of Medicaid Expansion under Affordable Care Act Comments. N. p. , 07 Feb. 2013. Web. 03 Mar. 2013.