Cabrera 1 Richard Cabrera Ms.

Lavia English 101 6 September 2012 Obamacare: Endangering a Recovering Economy Healthcare is a controversial issue in the United States. Many people in America are without health insurance which is either by choice or because they simply cannot afford it. So, our president Barack Obama came up with Obamacare or The Patient Protection and Affordable Care Act (PPACA): a form of healthcare reform and a push towards socialism. Even though this may seem as a positive addition for our country, it is not. America is currently recovering from a fairly large recession and this bill is endangering that recovery. Obamacare has an overwhelming negative impact on the economy, and is doing more harm than help for our country. What does Obamacare actually entail? Obamacare states that all firms with fifty employees or more must provide healthcare to their employees. The bill also extends a rebate to Medicare prescription drug beneficiaries of $250; it bars insurers from not providing care when people get sick. It would subsidize the cost of the insurance for low income households. Ultimately the bill would expand healthcare coverage to 32 million people in the U.S. and would fine anyone without insurance. This bill would also cause a temporary boost in jobs followed by heavy taxes and job loss, the taxes would be raised dramatically to help pay for the increased federal budget. It was the goal of the reform to be deficit neutral, which means they have included a

combination of taxes on the higher income, medical devices, pharmaceuticals, and Medicare spending cuts (Brooks). This may seem like something that could really help our country rather than hurt it, but look at it from an economic stand point. This country is struggling to recover from this recession and is slowly getting back on two feet, but push it down when its almost back up? Thats what this reform is going to do. Those supporting the bill say that the bill has a financial plan and a planned budget so that the effects of the bill will return deficit neutral. Deficit neutral means that the bill will not gain or lose any money a net loss and gain of $0. Their plan for a neutral deficit is a large increase in taxes and mandates. The CBO (Congressional Budget Office) estimates the cost of the bill to be $940 billion over a decade and even though there will be mandates and raised taxes, there will still be an increased deficit by an average $75 billion per year (Brooks). The nations publicly held debt will be $753 billion higher by 2020; this will tear down our recovering economy through huge amounts of lost jobs. Such astronomical debt crowds out other productive investments and will lead to an estimated 670,000 lost job opportunities a year states Karen Campbell, Ph.D. The bill is bringing up any penalties, fees, and taxes on businesses and investors causing them to have fewer funds for potential future investments in the economy, and investments like these are what are currently re-stimulating the economy. Fewer investments will also return a decrease in productivity and will result in large quantities of money being withdrawn from various goods and services in the field. What about the direct economic effect on the medical field itself? Supporters state that the increased attention towards the medical field will help it flourish. They say that the field will

become larger opening more jobs, hospitals, and businesses. This might happen in the first year or so but it will only be temporary until the taxes, higher interest rates, and larger premiums kick in. The higher taxes and smaller economic pie, brought by the effects of this dreadful bill, will result in lowered wages and salaries in the medical field along with pressure on higher interest rates to make up for what has been lost. Lower wages will also result in lower amounts of taxable income. This means the amount of income tax collected will not be near the desired amount to reach the neutral deficit promised by the Obamacare project. This in turn will result in less money in hand or savings for the people, companies, and corporations which is money that would potentially be reinvested into the economy. People who have healthcare will be facing higher interest rates and a higher premium because the bill includes a mandate requiring more generous levels of coverage which in turn will cause overall higher premiums and limiting or eliminating cheaper options publicly along with privately since the mandate also requires the uninsured to purchase their own insurance. Due to this higher interest more money will be diverted away from paying the actual premium resulting in more interest and more money going to waste. Roughly $23 billion more per year (Campbell et al.) would be spent by the government on the enlarged interest rates than what is normally spent. Also, the higher premiums will cause the corporations and the government to pay more for their employees, again increasing deficit. Indeed, these front-loaded costs slow economic growth with higher inflation and higher interest rates, which overwhelm the benefits the proposal hoped to gain in later years. (Campbell et al.). These front-loaded costs are the higher interest rates spoken of previously which draw companies away from what needs to be paid, the taxes and premiums, and strangling some of the benefits the proposal was promising for a neutral deficit

outcome. Also the Insurers have the ability to hike premium rates because the bill does not put a cap on pricing and this can continue to occur until strict competition arrives, most likely in late 2014. If looking at the effect on individuals and small businesses it is still drastically overwhelming. Supporters of the bill are saying that it will positively affect small businesses and it may, but only those that fall under the bills certain conditions. Businesses with 50 or more employees will have a choice beginning in 2014: they can sponsor a health plan for 100% of their workers (even those signed up for government-subsidized health insurance) or pay $750 per worker in penalties to the federal government (Losey). Some businesses may find it cheaper to toss out the healthcare coverage and pay the fine forcing employees to pay for their own insurance or face their own fine. Companies ranging from 25 49 employees will not be forced to provide healthcare for their employees or be faced with fines, which may cause smaller businesses to stop hiring employees once their firm reaches 49 employees. Small businesses will do this to avoid supplying health insurance to their employees causing the employees to acquire their own insurance or be fined by the government especially if the economy is in the predicted state after the bill. Although if a company employs less than 25 and provides their employees with healthcare, they are subject to tax relief which pays up to 35% of their premiums (Losey). The tax break these companies will receive will depend on a couple of variables: the number of employees they have and their average salary. However, this tax break wont be offered to sole proprietorships (Losey). Essentially almost the only way this has a positive impact is for corporations smaller than 25 employees and only slightly for those smaller than 49 employees.

The previously addressed issue on job loss will cause the demand for health services to increase as the amount of employees drop. Less employees and job opportunities will cause pricing to increase and the wait time for treatment to increase as well, and due to lowered salaries many professionals will either choose other degrees or leave for higher pay in another country. Examples of this are already shown today as professionals migrate from socialist foreign countries, such as Venezuela, France, and Canada, to the United States for higher pay. The PPACA also increases the Medicare hospital insurance component of the payroll tax on wages and self-employment income in excess of $200,000 ($250,000 joint) by 0.9 percentage pointsa provision that will raise around $18 billion per year.(Campbell et al.). This is the governments tax on the rich and unfortunately will also affect small businesses, even those that are already struggling, businesses at all earning levels. In a time when firms are making hard decisions about layoffs, successful businesses could face tax increases of thousands of dollars. The overall average tax increase faced by small businesses filing individually would be about $600.(Campbell et al.) This may not seem like much when compared to some other figures that have been shown but this figure will be added to their current taxes and can make the difference for firing a few employees from the company resulting in more drastic job loss. Even now a lot of companies would not be able to handle these increases in taxes and would be forced to fire employees, cut back on budget, or foreclose. Also, due to higher coverage and required coverage, more people will be visiting hospitals under their insurance for more minor illnesses simply because they can, for any possible reason. This will cause hospitals and urgent care center to be constantly overwhelmed and most likely understaffed due to the job loss and employee cuts which can unfold to be a large issue as shown in other socialist cou ntries.

Although there may be a few positives, like nationwide healthcare (or face a fine) and tax cuts for the smallest of businesses, Obamacare will result in a hurt economy. Almost all aspects will be affected, the businesses, the medical field, the individual, and the investments. This is mostly because of the multiple flaws in the budgeting plan that has been expressed and that not all aspects of the supposed neutral deficit were carefully accounted for. When looking at the bigger picture and the future of America, Obamacare may be something that is not wanted to be a part of a successful country.

Works Cited Brooks, Kathleen. "The Economic And Market Effects Of Obamacare." Ninemsn.com. Microsoft Network, 29 June 2012. Web. 12 Sept. 2012. Campbell, Karen, Ph.D, Guinevere Nell, and Paul Winfree. "Obamacare: Impact on the Economy." Heritage.org. The Heritage Foundation, 22 Sept. 2010. Web. 12 Sept. 2012. Gonshoroski, Drew. "Medicaid Expansion Will Become More Costly to States." Heritage.com. The Heritage Foundation, 30 Aug. 2012. Web. 12 Sept. 2012. Losey, Bill. "How Will Obamacare Affect Your Small Business?" Bill Losey. Bill Losey Retirement Solutions, 2010. Web. 12 Sept. 2012.