The Patient Protection and Affordable Care Act, which was signed into law in October 2010, has three main goals: reforming the private insurance market for individuals and small groups, expanding Medicaid for the working poor, and changing the way medical decisions are made in the country (Silvers, 2013). These objectives rely on private choices rather than government regulation, with the expectation that rational decisions will be made based on incentives and other factors (Hall and Lord, 2014). The Act assumes that by working together under the reforms and paying a fair price, users will have access to high-quality medical care through risk sharing (Hall and Lord, 2014). This paper will critically evaluate the two aspects of the Act – the private insurance market reforms and the Medicaid expansion – and assess their potential for success.
The first objective focuses on changing the rules and mandates for individuals (Silvers, 2013). The Affordable Care Act encourages insurance companies to take on more risks by offering policies that are comparable to everyone with minimal variations (Jacobs et al, 2012). The Act prohibits the exclusion of pre-existing conditions and policy cancellations, and limits the increase in insurance rates. To make this possible, insurance companies must enroll a representative sample of the population to achieve an average risk level. This requires everyone to have insurance, but this may not be feasible for those who cannot afford it. To address this issue, the Act offers subsidies that cover more than 50 percent of the cost of personal insurance for middle-income families, creating strong purchasing power. This, in turn, promotes competition among insurers and drives down premiums, putting pressure on providers to offer high-quality services (Reisman, 2015). However, if the private market fails to deliver these outcomes, the assumptions of the Act may not hold true. Studies have identified significant problems with the organization and payment of the US healthcare system, including limited information and choices, and the ability of participants to respond to incentives and pressures (Silvers, 2013). Information asymmetry can also create market failures, as health insurance brokers may receive higher premiums from small businesses without considering the quality of the contract for the clients. This can lead to higher premiums for businesses and lower-quality service for insured individuals (Hall and Lord, 2014). Additionally, existing distortions in the market, such as the shortage of physicians and restrictions caused by pharmaceutical patents, can hinder competition and prevent desired outcomes from being achieved (Hall and Lord, 2014). These potential barriers may require changes in processes, compensation negotiations, and technology adoption to promote competition and achieve the goals of the private insurance market reforms under the Affordable Care Act.
The main aspect of Medicaid reforms is the expansion of coverage to the working poor, who were previously uninsured (Medicare Payment Advisory Commission, 2013). Some states have opposed this expansion, causing uncertainty about its effectiveness and impact on workforce mobility (DeVoe, 2013). However, large businesses support the expansion as it reduces the cost of uncompensated health care (Chang and Davis, 2013). These businesses also anticipate lower premiums, cost savings, and job growth (DeVoe, 2013). Nevertheless, there are concerns that low-wage workers may be trapped in a low-quality program without any benefits for their low-income jobs (DeVoe, 2013). This raises questions about the effectiveness of Medicaid expansion without specific mandates and coverage for small businesses and low-income jobs. Another issue is the potential for perverse payment incentives (Reisman, 2015). The incentives offered for different services and the biased updates to fees for specialized services can create information asymmetry and restrict competition, hindering the desired outcomes of Medicaid expansion. The implementation of Medicaid expansion also faces challenges, such as the difficulty of accessing uninsured individuals, language barriers, and mental capacity issues (Rosenbaum, 2011). Overcoming these barriers is crucial for successfully implementing the expansion and providing insurance to the working poor, who have a maximum income of 33 percent of the federal poverty level.
In conclusion, this paper discussed the two main components of the Affordable Care Act and highlighted the potential benefits of the reforms. However, market failures may prevent competition from achieving the desired outcomes. While there are many reforms that can benefit the poor, the fundamental structural issues of the US healthcare system remain unchanged, which may hinder the success of these reforms. Therefore, institutional reforms are necessary to reduce market failures and enable other reforms to be implemented. Without these institutional changes, the reforms under the Affordable Care Act may not be successful.
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References
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DeVoe, J.E. (2013). Being uninsured is bad for your health: Can medical homes play a role in treating the uninsurance ailment? Ann Fam Med, 11(5), 473-476.
Hall, M.A. and Lord, R. (2014). Obamacare: What the Affordable Care Act means for patients and physicians. BMJ, 1-10.
Medicare Payment Advisory Commission. (2013). Data Book: Health Care Spending and the Medicare Program. Washington, DC, 97.
Reisman, M. (2015). The Affordable Care Act, Five Years Later: Policies, Progress, and Politics. Perspective, 4(9), 575-600.
Rosenbaum, S. (2011). The patient protection and affordable care act: Implications for public health policy and practice. Law and the Public’s Health, 126, 130-135.
Silvers, J.B. (2013). The Affordable Care Act: Objectives and Likely Results in an Imperfect World. Ann Fam Med, 402-405.