Josh Schreiber

Econ 2020
July 31, 2015
Medicaid Expansion and the Affordable Care Act (Obamacare)
The Affordable Care Act is the largest government program in recent history that impacts
everyone living in America. Just this month the original government healthcare programs,
Medicare and Medicaid celebrated their 50th anniversary.1 Obamacare, aka, The Affordable Care
Act, has impacted both of these programs and mostly through the expansion of Medicaid has
decreased the percentage of uninsured people. The burden of the cost of the Affordable Care Act
is shared with insurance companies, medical device manufacturers, tax payers, insurance policy
holders, health care providers and more. The aim of Obamacare was to reduce the cost of health
insurance for all Americans, although only those who qualify for Medicaid or health insurance
subsidies are seeing a decline in insurance expenses. As an insurance broker I help families and
businesses navigate the complexities of the Affordable Care Act and the health insurance options
it has made available.
Medicare is the federal governments insurance program for folks over 65, some who
qualify for it via disabilities and for individuals suffering from Kidney failure.2 According to Dr.
Drew Altman and Dr. William First, Medicare accounts for the coverage of 46 Million older
adults (age 65 and older) and 9 million younger adults.3 This month I presented a Medicare 101
training to employees of a Salt Lake Law firm where much of the comments to the Medicare
1

www.Medicare.gov (Accessed July 30, 2015)

Whats Medicare? (Accessed July 31, 2015) https://www.medicare.gov/sign-up-change-plans/decide-how-to-getmedicare/whats-medicare/what-is-medicare.html
2

Medicare and Medicaid at 50 Years Perspectives of Beneficiaries, Health Care Professionals and Institutions, and
Policy Makers (Accessed July 31 , 2015)
http://jama.jamanetwork.com/article.aspx?articleId=2411288&guestAccessKey=bcf5e21a-1163-4fb4-8a55c49b488977d7#jsc150005r11

program revolved around how confusing Medicare is. But regardless of the confusion, for many
Medicare beneficiaries the extremely low cost of a Medicare premium makes the program very
attractive, which is a direct economic benefit to millions of Americans. For most individuals
covered by Medicare, their Medicare Part A premium is $0 and their Part B premium is just
$104.90 each month.4 Part A covers hospital services and Part B covers outpatient services such
as Dr. visits. The combined amount of the deductibles ($1260 and $147) are very comparable to
average employer sponsored health plan, which is $1,217 according to a survey done by Kaiser
Health Benefits Annual Survey 2014.5 But the average premium for single employee coverage is
$6,212 versus $1,260 for a year of Medicare Part B premiums.6 The net effect to these cost
reductions in premiums are that many eligible for Medicare individuals immediately move to
Medicare upon turning 65. The consequence to tax payers is that the cost of Medicare for these
individuals in 2013 was $585.7 billion according to Doctors Altman and First.7 This staggering
number, they say, accounts for 14% of the federal budget. This is a massive government
expenditure that based on current CBO calculations is set to be without funds in 2030. This
massive government expenditure does though ensure that individual income and ability to spend
or save is much higher than could be achieved without government funding. The fact is this
government funding is paid for through payroll tax deductions as is its sister program Medicaid.
Medicaid, another massive government assistance program is a combined state and
federal insurance program for low income individuals and families. Medicaid covers nearly 72
4

Whats Medicare? Accessed July 31, 2015) https://www.medicare.gov/sign-up-change-plans/decide-how-to-getmedicare/whats-medicare/what-is-medicare.html

5
The Kaiser Family Foundation & Health Research & Educational Trust. Employer Health Benefits, 2014 Annual
Survey (2014): 136
6
The Kaiser Family Foundation & Health Research & Educational Trust. Employer Health Benefits, 2014 Annual
Survey (2014): 182
7
Medicare and Medicaid at 50 Years Perspectives of Beneficiaries, Health Care Professionals and Institutions, and
Policy Makers (Accessed July 31 , 2015)
http://jama.jamanetwork.com/article.aspx?articleId=2411288&guestAccessKey=bcf5e21a-1163-4fb4-8a55c49b488977d7#jsc150005r11

million Americans.8 The Affordable Care Act offered financial support for states who would
expand their Medicaid coverage to not only eligible adults with children, but to needy adults
without children. Medicaid expansion did not impact any other group other than adults without
children. That financial support includes millions of dollars in assistance to cover the claims
incurred by these individuals which would reduce over time. Utah for example has been very
hesitant to take the expansion and funding offer out of worry that the funding will end and
Utahns will be on the hook to continue a very expensive program, which the legislature feels is
not supported with the current budget. Over the course of many months last year I attended each
healthcare task force meeting that was held at the state Capitol where discussions were held
about the number of individuals who would be impacted with expanded coverage as well as how
much that would cost the Utah tax payers.
The hesitancy of the legislature has been supported with data coming from states who
have expanded Medicaid and are finding the number of covered individuals and the cost
associated with that has soared passed their expectations. According to Christina Cassidy with
the Associated Press, More than a dozen states that opted to expand Medicaid, have seen
enrollments surge way beyond projections, raising concerns that the added costs will strain their
budgets.9 Hospitals on the other hand have loved the expansion and they have seen a surge in
profits. According to Peter Cunningham, Rachel Garfield and Robin Rudowits of the Henry J.
Kaiser foundation, hospitals in expansion states saw an increase (8.2 percent) in Medicaid

Pugh, Tony (July 29,2015) Medicare and Medicaid Face Growing Pains at Age 50. (Accessed July 31, 2015)
http://www.mcclatchydc.com/news/nation-world/national/article29436406.html
9
Cassidy, Christina. Medicaid Enrollment Surges, Stirs Worry About State Budgets (Accessed July 31, 2015)
http://hosted.ap.org/dynamic/stories/U/US_MEDICAID_EXPANSION_STATE_BUDGETS?SITE=AP&SECTION=HOME
&TEMPLATE=DEFAULT

revenue from 2013 to 2014.10 The economic benefit lies in comparative details that note these
individuals were receiving charity care or the hospitals were simply writing off the cost of their
care as a tax deduction. But tax deductions dont compensate for the total lost revenue so
insured patients pick up the tab in large for this uncompensated care via higher costs of care for
those who have insurance, and therefore higher insurance premiums. Now that these hospitals
are being compensated for claims through Medicaid, private insured rates should see a decline as
they wont be burdened as much in the future as Medicaid continues to pick up more of the cost
of care that was once being received as tax write offs. These two programs, Medicaid and
Medicare combined account for 23 percent of the federal budget.11
Americans were happy to know they could keep their insurance if they wanted. But that
decision wasnt necessarily theirs to make, as insurance companies were given the discretion to
keep their older policies in place or move their clients into qualified ACA plans. Insurance
companies were burdened to fund through fees and taxes a large part of the ACA budget. Those
taxes and fees were passed on to consumers. Consumers have less discretionary money to spend
as their premiums have increased, or for those who benefit through lower premiums thanks to
subsidies, they have more money to spend. One Salt Lake family whose health care options I
reviewed this year is able to pay $627 monthly with their grandmothered plan. But next year
they will be forced off of their plan they want to keep to a new ACA plan, which in 2015 would
cost $1226 monthly. This doubling of costs for nearly the same coverage shows the MPC
increasing, but doesnt account for the fact that this expansion is not voluntary and unwanted by

10

Cunningham, Peter. Garfield, Rachel. Rudowits, Robin. How are hospitals faring under the Affordable Care Act?
Early experiences from Ascension Health (April 30, 2015) (Accessed July 31, 2015) http://kff.org/healthreform/issue-brief/how-are-hospitals-faring-under-the-affordable-care-act-early-experience
11
Pugh, Tony (July 29,2015) Medicare and Medicaid Face Growing Pains at Age 50. (Accessed July 31, 2015)
http://www.mcclatchydc.com/news/nation-world/national/article29436406.html

this family and surely many more like them. This simply leaves less income for families to save,
so the MPS will decrease equally to the increase in the MPC.
The true economic impact of the Affordable Care Act if measured today must be
measured on the financial and emotional impacts it has had on individuals, families, corporations
and entire industries who have had to spend millions of dollars on becoming compliant with this
law. One of the last legal challenges to the ACA regarding subsidy availability for individuals in
states who didnt build their own health insurance marketplaces to purchase insurance, King vs
Berwell, was upheld by the Supreme Court. The country and the industry was holding back from
making investment and business decisions until that confirmation came out. Now that the law
has passed the economy is seeing large insurance companies merging together where they once
competed so strongly against one another. What isnt known is if these mergers will benefit
Americans purchasing their future health plans with lower costs and stabilized benefits.
According to Bruce Wright with International Business Times, there is one thing many
professionals who deal with the topic of health insurance seem to agree on -- it's not necessarily
good for consumers.12 As is the case with government programs there are those individuals who

will be better off and those who are not affected or worse off. The US economy does not yet
fully know the long term impacts of the Affordable Care Act and Medicaid expansion. Still each
year following the passage of the ACA, most insurance companies are increasing insurance
prices or the IRS is charging increasingly higher penalties for not having insurance. The short
term impact has been both positive and negative to our nation and local communities.

12

Wright, Bruce (July 24, 2015) Anthem Cigna Health Insurance Merger: What Acquisition Means For
Consumers. (Accessed July 31, 2015) http://www.ibtimes.com/anthem-cigna-health-insurance-mergerwhat-acquisition-means-consumers-2023846

BIBLIOGRAPHY

Altman, Drew PHD. First, William MD. Medicare and Medicaid at 50 Years Perspectives of
Beneficiaries, Health Care Professionals and Institutions, and Policy Makers (Accessed July 31 ,
2015)
http://jama.jamanetwork.com/article.aspx?articleId=2411288&guestAccessKey=bcf5e21a-11634fb4-8a55-c49b488977d7#jsc150005r11
Cassidy, Christina. Medicaid Enrollment Surges, Stirs Worry About State Budgets (Accessed
July 31, 2015)
http://hosted.ap.org/dynamic/stories/U/US_MEDICAID_EXPANSION_STATE_BUDGETS?SI
TE=AP&SECTION=HOME&TEMPLATE=DEFAULT
Cunningham, Peter. Garfield, Rachel. Rudowits, Robin. How are hospitals faring under the
Affordable Care Act? Early experiences from Ascension Health (April 30, 2015) (Accessed July
31, 2015) http://kff.org/health-reform/issue-brief/how-are-hospitals-faring-under-the-affordablecare-act-early-experience
Pugh, Tony (July 29,2015) Medicare and Medicaid Face Growing Pains at Age 50. (Accessed
July 31, 2015) http://www.mcclatchydc.com/news/nation-world/national/article29436406.html
Home page www.Medicare.gov (Accessed July 30, 2015)
The Kaiser Family Foundation & Health Research & Educational Trust. Employer Health
Benefits, 2014 Annual Survey (2014): 136
Whats Medicare? NA (Accessed July 31, 2015) https://www.medicare.gov/sign-up-changeplans/decide-how-to-get-medicare/whats-medicare/what-is-medicare.html