The Economic Opportunity of Health Care Reform
ECO 203 – Principals of Microeconomics
As the timeline unfolds for Health Care Reform (HCR), it has proven to be a rough road towards change. According to the Internal Revenue Service, HCR was initiated by the Affordable Care Act (ACA) on March 23, 2010 (IRS, 2010). Since that time, a number of initiatives, regulations, and important legal changes have begun to change the way health care will be implemented for the citizens of the United States moving forward. For some of us these changes have been long awaited, and for others it will create an otherwise unexpected and unwelcome expense. The most talked about initiative which is expected to be effective January 2014, is the Health Care Tax Credit. This paper will review the building need for HCR and the purpose for the Health Care Tax Credit. Also acknowledged are the arguments opposed to the implementation approach, and the potential economic benefits of the subsidy. “Choice is the heart of economics,” according to the Economics book by Krugman and Wells, and includes an opportunity cost or a trade-off for a good or service (2012, Ch. 1). In translation, payment or sacrifice is required in order to get something in return. In today’s normal free market scenario, the opportunity cost for health care to many U.S. citizens is simply unaffordable. According to an article by Jeffrey Young, the cost of a family insurance plan in 2011 had increased by 113% since 2001 (2011). The same article indicates the average annual premium cost for a family plan was $13,704 not including the co-pays for visits or prescriptions. For many hard working families today, this would be more than 20% of their income which could otherwise be used for food, transportation and clothing. The situation implies that a completely free market system of providing healthcare is simply not practical if so many hard working families are squeezed out of the opportunity to even consider shopping for a health plan. A health spending research study, by Fabian Duarte (2012) concluded “low-income individuals forgo medical care more often than do high-income individuals” (p. 834). Duarte’s research study as well as the Economic Report of the President (ERP) confirm the rise in health care costs and spending can be attributed to an increase in life expectancy, population growth and increased illness due to inadequate healthcare (Duarte, 2012, Council of Economic Advisors, 2013). According to the Duarte (2012) research study, as the price of health care increases, patients are more likely to be selective about the treatments they seek services for. Duarte’s study revealed that treatment for an arm cast setting or gall bladder removal (emergency procedures) are very much inelastic, while seeking services for substance abuse or physical therapy are more elastic: meaning people are less likely to use out of pocket co-insurance to seek non-urgent or not life threatening services (Duarte, 2012). These elasticity findings can lead to reason, that an increase in health care spending may be connected to neglected health care needs; since an unattended chemical dependency or weakened body functions and abilities can eventually lead to serious, expensive, long-term health issues if left untreated. The Department of Health and Human Services also confirms that early detection of several manageable health care problems decreases hospital admissions and improves mortality rates (2012). A routine exam can detect blood pressure problems, and be managed by medication, but if left undetected might increase the risk of a heart-attack leading to emergency treatment or even death. Access to affordable and quality health care through the ACA, could be a step in the right direction toward the pro-active measures of reducing health care inflation. Health Care Reform in general intends to improve access and reduce...
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