The Patient Protection and Affordable Care Act

Introduction

The three main objectives of the Patient Protection and Affordable Care Act, signed in October 2010, include the following: reforming the private insurance market, mainly for individuals and small group purchasers; expanding Medicaid to the working poor, whose maximum income is around 33 percent of the federal poverty level; and altering the way medical decisions are made in the country (Silvers, 2013).

These three objectives are primarily determined by private choices rather than government regulation, with the expectation that decisions will be made rationally based on incentives while constrained by other factors (Hall and Lord, 2014).

Hence, it is assumed that for the production of a high value good, namely medical care access, the users will work jointly within the reforms at a price that is appropriate, the financing of which is done through risk sharing (Hall and Lord, 2014).

Given this, the two aspects of the Patient Protection and Affordable Care Act - namely the private insurance market reforms and the Medicaid expansion - are critically evaluated in this paper. We will examine whether these two will be successful or not.

Private Insurance Market reforms

The first objective is based on the variations in the rules and the mandates for individuals (Silvers, 2013). The Affordable Care Act facilitates different insurance companies to take more risks through the provision of policies that are comparable to everybody with only slight changes (Jacobs et al, 2012). The Act does not allow the exclusion of pre-existing conditions or for policy cancellation, and constrains the rise in the rates. To enable this, it is mandatory for the insurance companies to enrol a representative section of the population so that the average risk assumed under the Affordable Act is realized. This necessitates the mandatory purchase of insurance by everybody. At the same time, it is not realistic to assume a mandatory purchase when there are affordability issues; this problem is solved through the requirement of subsidies in the Act (Hall and Lord, 2014).

The Act provides for a subsidy of more than 50 percent for the purchase of personal insurance for a middle-income family, thus facilitating very high purchasing power. This in turn ensures robust competition among the insurers through the rise in the purchasing power of individuals who were previously uninsured. The implicit assumption under the Act is the translation of this competition into lower premiums and provider pressures so that a high-quality value service is obtained (Reisman, 2015).

If there is a failure in the private markets to achieve these outcomes, these assumptions will not be valid. Studies have shown many significant problems in the organization and payment of the US health system, in the availability of information and choices, and in how capable the participants are in responding to the provision of incentives and pressures under the Act (Silvers, 2013). There can be a lot of problems associated with market failures arising from information asymmetry.

There is a chance that brokers in the health insurance field might receive premiums from the clients, mainly small businesses, as well as payments from the insurance providers without considering the quality of the contract for the engaging firms by the providers. Consequently, the premiums obtained by the health insurance brokers will be higher than the physicians in primary care, while the small businesses that are insured will not know this (Hall and Lord, 2014). Hence, it is not guaranteed that competition among the insurers might translate into lower premiums and pressurize the providers for conducting high-quality service.

Another constraint is the existing distortions that restrict competition, including the lack of supply of physicians and the limits to competition created by pharmaceutical patents etc. (Hall and Lord, 2014). All these potential distortions to competition can result in process reorganization, alternative compensation negotiation, chances of using more efficient technology, and various other practice changes that can create significant market barriers to obtain the desired outcomes of the private insurance market reforms under the Affordable Health Care Act.

Medicaid expansion

The main component of the Medicaid reforms is its expansion to the working poor, people who were earlier uninsured (Medicare Payment Advisory Commission, 2013). There were concerns regarding the expansion of Medicaid in some states, causing the blockage of said expansion and resulting in doubts regarding its effectiveness and effects on the working force mobility (DeVoe, 2013).

At the same time, big businesses strongly supported expanding Medicaid due to the fact that the payment for uncompensated health care would be reduced (Chang and Davis, 2013). The perceived benefits for employers through the expansion of Medicaid included lower premiums, cost reduction, and job expansion (DeVoe, 2013).

Despite these, the main concern about Medicaid expansion is the chance of trapping low-wage workers into a low-quality program since there are no advantages associated with the existing low-income jobs (DeVoe, 2013). Thus, without specific mandates and coverage for small businesses and low-income jobs, how far Medicaid expansion will benefit those with low-income jobs is an area of concern. Another major issue associated with obtaining the benefits of Medicaid expansion is the surplus incentives for perverse payment (Reisman, 2015).

The incentives can vary from the fee payment for different services to individuals, and the Medicaid schedule of fees for the specialized services with biased updates (Reisman, 2015). All these create information asymmetries in the market, restricting competition to get the desired outcomes through Medicaid expansion. Implementation challenges associated with Medicaid expansion include difficulties accessing the uninsured, the chances of many not having English as their primary language, and the likelihood of many uninsured having diminished mental capacity (Rosenbaum, 2011).

All these create significant challenges for implementing the expansion of Medicaid to the working poor. Hence, state agencies and the state's insurance exchanges, which implement Medicaid, must overcome several obstacles to execute the expansion and achieve desired outcomes. Before overcoming these barriers, achieving the target of providing access to insurance for the working poor, whose maximum income is around 33 percent of the federal poverty level, will be challenging.

Conclusion

In this essay, the two main components of the Affordable Health Care Act, signed in October 2010, were discussed. The discussion shows that although many benefits can derive from the reforms, market failures might prevent competition, arising from the reforms, from achieving its desired targets. Though there are many reforms that can benefit the poor, the fundamental structural defects of the US health care system remain unchanged, which could constrain the achievement of the desired outcomes. Hence, institutional reforms need to be implemented in such a way that market failures will be reduced, and then other reforms in the market can be pursued. Without the implementation of these institutional reforms, the reforms mentioned under the Affordable Health Care Act will not succeed.

References

Chang, T. and Davis, M. (2013). Adult Medicaid beneficiaries under the Patient Protection and Affordable Care Act compared with current adult Medicaid beneficiaries. Ann Fam Med, 11(5), 406-411.

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.

Did you like this example?

1127

47