President Donald Trump about Health Care

On December 22, 2017, President Donald Trump signed the Tax Cuts and Jobs Acts of 2017, which reduced the individual mandate penalty to $0. Using economic reasoning and/or graphs Provide answers to both sides of the arguments for why or why not this was a good health policy?

You need to find at least four current references or more. Use these resources to answer the question.

Background - The TCJA repeals the ACA individual mandate that requires all Americans under 65 to have health insurance or pay an annual penalty, $695 per person or 2.5 percent of income—whichever is higher. This will erase some of the gains in insurance coverage achieved since implementation of the ACA’s coverage expansions. The law is expected to reduce federal revenues by a total of $1.649 trillion between 2018 and 2027, amounting to a 4% reduction in revenues over the period.1 The repeal of the penalties will increase the number of Americans without insurance by four million in 2019 and by 13 million in 2027 as per the CBO.

Why is this a good health policy?

• Government spending on subsidies to help people afford coverage would reduce: Eliminating the mandate will save the government more than $300 billion over 10 years because fewer people will receive insurance subsidies or Medicaid, the budget office estimates. If we were to compare this number with the number the government would receive in fines, it makes sense to remove the mandate (Cost benefit analysis). The total amount in penalties for 10 years would be $ 50 billion and the subsidies that government would have to pay out to cover the people is $ 300 billion. The marginal benefit is $ 250 billion.

• People who are in good health and choose not to buy private insurance, will have more disposable income on their hands - Consumer spending is the single most important driving force of the U.S. economy. Even a small change can affect the economy. Take for example, the 2007 market recession. The gas prices were high, which means people had less disposable income. If slow consumer spending continues, the economy can go into recession. With the repeal of the mandate the households who chose not to spend on healthcare insurance have the money, they will go and spend that money in the market on consumer goods or anything else that will result in a better economic condition.

Why is this not a good health policy-?

• The repeal of the penalties will increase the number of Americans without insurance by four million in 2019 and by 13 million in 2027 – This is not a good health policy because as a society we will have 13 million uninsured people by 2027. This means more burden on the society as we will have to pick up the tab and pay for medical care for all the uninsured citizens. Which means, there is less money to spend on infrastructure, education etc. This will also impose costs on other participants in the health care system. We can assume here that the opportunity costs that the healthcare institutions were using to invest in better technologies, more research will be sacrificed. Under the ACA, more people were insured and the hospitals did not have to write off money as insurance company paid for the healthcare costs. Under the new plan the opportunity costs will shift to less of the Research and new technological investments. This can be explained with the diagram below.

• The mandate penalties were projected to generate about $5 billion annually in federal revenues, and these revenues will be forgone when the penalty is reduced to zero – Again, this is a loss of revenue for the government. The government will now lose $ 5 billion annually. This money could be used for more research and development on providing better healthcare to citizens. If we were to do the Cost benefit analysis here, the government does not incur any costs to impose the mandate on the public, however, the Benefits were about $ 5 billion each year. The government could use that $ 5 billion to pay of the debts. However, this point can be argued in long term scenario when you take the amount of subsidies government has to pay to cover the people who cannot afford to pay for private insurance.

• Increase in premiums by insurance companies due to lower enrollment- The demand for private insurance was high during the mandate. When it is not mandatory anymore to require insurance, people will not buy insurance unless they are really sick. This will result in higher premiums, making it unaffordable for people who want to buy insurance. CBO also found that eliminating the individual coverage requirement would raise insurance premiums by 10 percent in the individual market. That would increase health care costs for more than 13 million people who buy insurance on their own, without federal help. This can be explained by Supply and demand curves below.

• Increase in inefficiencies in the ER - When people do not have insurance, they rush to the ER for medical help. A recent study from the University of Maryland School of Medicine found that nearly half of U.S. medical care already comes from emergency rooms — and a different study, from the New England Healthcare Institute, concluded that the overuse of U.S. emergency departments (especially for non-urgent matters) results in $38 billion in wasteful spending each year. We can expect that inefficient spending to go up. This also can be explained with supply and demand graphs below.

• A health care provider’s knowledge about their patient’s health histories and opportunities to educate them about preventative care will go down – If insurance in mandatory, and most people have insurance they take care of their health. They make full use of the premiums they pay for preventative care. In the absence of a mandate, preventative care will decline. The U.S. Office of the Surgeon General reports that $3.7 billion in medical costs could be saved in the U.S. each year if preventative screenings increased by 90 percent. Use of these screenings is, unsurprisingly, already very low among the uninsured.

Conclusion

CBO and JCT’s estimates of this policy are inherently imprecise because the ways in which federal agencies, states, insurers, employers, individuals, doctors, hospitals, and other affected parties would respond to it are all difficult to predict.Despite the uncertainty, some effects of this policy are clear: For instance, the federal deficit would be many billions of dollars lower than under current law, and the number of uninsured people would be millions higher. However, if you consider the health conditions of the society that may decline as people will hesitate to get the care that they need, eventually leading to more burden on the society and the community.

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