Ask Stacy: Isn’t Obamacare Going to Wreck the Economy?

This week I’m taking two questions, both about the Affordable Care Act. The first is about the “ripple effects” of diverting money from consumer spending to health insurance. The second is about the affordability of health insurance under the new law.

Here’s the first one:

Could you comment on the effect of Obamacare on the economy? For example, if I have to buy health insurance (or be fined) I neither need or want, I expect that I will not be able to buy some of the things I do need – food, gas, school clothes and supplies, etc., etc. My insurance money will NOT be put into the economy but given to the insurance company. Companies that rely on my spending (and millions like me) will either close or lay off people (a huge loss of jobs?). There may be many other factors to consider as well. The ripple effect will be — what? – Larry

Why Obamacare made health insurance mandatory

To answer Larry’s question, here’s a simple example of the way the health care system worked prior to passage of the Affordable Care Act, also known as Obamacare.

  1. Larry doesn’t buy health insurance, because he neither needs nor wants it and he’d rather help the economy by spending his money on other things.
  2. One day, Larry wakes up unable to properly breathe. He goes to the emergency room, where he soon discovers he needs triple bypass surgery.
  3. Larry is admitted to the hospital and the $200,000 surgery is performed.
  4. Larry can’t begin to afford this bill, so he declares bankruptcy. The hospital loses $200,000.
  5. To recoup the loss the hospital suffers because of Larry and others like him, it raises all its rates.
  6. Since the hospital is now charging more, the price of insurance goes up.
  7. Because Larry didn’t pay his hospital bill, his fellow citizens indirectly pay it for him.

This is the simple logic behind the Affordable Care Act. The reason this law exists is to make sure as many people as possible have health insurance. Other than letting those without resources die, it’s the only way to prevent your fellow citizens from paying for your health care.

Nobody likes paying big bucks for insurance, Larry, and every premium we pay diverts money from other parts of our economy. Whether it’s car, home or health insurance, we can all think of things we’d rather spend money on. Until, that is, we wreck our car, our house burns down, or we need a triple bypass.

The difference is, your wrecked car and burned house don’t cost me anything. Your triple bypass does. So unless you’re OK with either 1) dying if you can’t afford to get sick or 2) forcing the rest of us to spend our hard-earned money to pay for your health care, get some insurance.

For more on this topic, check out “Americans Don’t Want Health Insurance? Since When?

Falling through the doughnut hole

Now, here’s our second question, also relating to the Affordable Care Act:

I do not understand the affordable part of Obamacare. I am sure you have had other people complaining about this problem. I am currently only making just under $10,000 per year, I am a Florida resident so I do not qualify for Medicaid (single male). When I completed my application on Healthcare.gov, it says I will pay between $500 and $600 a month for insurance. I do not see anywhere that shows any type of reduction. Someone told me you receive the reduction as a tax credit. Duh, at my income I pay little tax. Where do they expect me to get the money in the beginning if this is so? I guess I will take the penalty. – Robert

When I first read Robert’s question, I assumed he was mistaken. After all, thanks to the Affordable Care Act, those who can’t afford health insurance will either qualify for Medicaid or get a subsidy to help pay for insurance on the exchange.

But it was me who was mistaken.

Robert and I both live in Florida, one of 23 states that have refused to expand Medicaid to cover people like him.

Florida’s Republican-led House of Representatives has thus far blocked efforts by both the governor and the state Senate to accept billions in federal funding to expand Medicaid. Had they agreed to accept this free money, people like Robert — single and living below the poverty level (annual income of $11,490) — would be eligible for Medicaid. But since Florida chose to refuse this funding, they’re not eligible.

As for the subsidies provided by the Affordable Care Act, Robert also is not eligible. That’s because subsidies are available only for those earning between 100 percent and 400 percent of the federal poverty level. Those earning less are supposed to qualify for Medicaid. Because Robert earns less than 100 percent of the poverty level, he’s not eligible for subsidies. And because the Florida House would rather stand on principle than accept free federal money to insure its poor citizens, he’s not eligible for Medicaid.

According to this article in the Orlando Sentinel, that makes Robert one of 995,000 Floridians in this position.

This problem arose not because of the Affordable Care Act, but because of the U.S. Supreme Court’s interpretation of it. The Supreme Court upheld the “mandatory coverage” part of the bill, but not the part requiring states to accept federal funding for Medicaid expansion. That left states opposed to the law with the ability to attempt to derail it by refusing to participate.

So now Robert and millions like him are required to buy health insurance, but conservative state legislatures like Florida’s are refusing to accept federal funding that would provide it free. In short, it’s more important for them to oppose Obamacare on principle than insure their poorest citizens.

Nice.

The state of Florida is in talks with the Obama administration about other sources of federal funding to insure its poorest citizens, but for now, that’s the way it is.

If Robert did qualify for subsidies, the tax credit he’d qualify for would go directly to the insurance company he selected, thus reducing his out-of-pocket insurance cost. So it wouldn’t matter that he’s in a low tax bracket.

What does matter, however, is for Robert to remember when election time rolls around who put their personal political agenda ahead of his need for free health care.

Got a money-related question you’d like answered?

You can ask a question simply by hitting “reply” to our email newsletter. If you’re not subscribed, fix that right now by clicking here. The questions I’m likeliest to answer are those that will interest other readers. In other words, don’t ask for super-specific advice that applies only to you. And if I don’t get to your question, promise not to hate me. I do my best, but I get a lot more questions than I have time to answer. Got any words of wisdom you can offer for this week’s question? Share your knowledge and experiences on our Facebook page.

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Comments & discussion

We welcome your opinions, but let’s keep it civil. Like many businesses, we reserve the right to refuse service to anyone. In our case, that means those who communicate by name-calling, racism, using words designed to hurt others or generally acting like an uninformed bully. Also, comments that include links to email addresses or commercial websites typically aren't posted. This isn't a place to advertise your business.

  • bigpinch

    Stacy, where, in God’s name did you ever get the idea that Federal money is free? You aren’t an idiot but you must think that we, your readers, are. What we did before health insurance was that I paid $35.00 for an office visit. Now, I pay $155.00 for a visit and that’s after paying my monthly insurance premium and the taxes that constitute that “free” federal money.

    Health care costs are ridiculously high and do not reflect the actual cost of providing care. The ACA does nothing NOTHING to bring those prices back to reality. It only insures that the costs will continue to increase and that quality health care will be a thing of the past.

    • MrEdw

      How true! I urge readers here to view a 2 minute video with a doctor who reveals the actual costs of medical care, including blood tests, exams, and the like. Just Google “doctor stops taking insurance.”
      Viewers: prepare to be shocked. The ACA should have considered the steps that could be taken to radically lower the
      Neither a liberal nor conservative view, just the reality of actual cost of medical practice.

  • Diane

    Very disappointed with you, Stacy…….Socialism does not work…..

    • ghortej

      I love when people make overly broad statements like this: “Socialism does not work”. Like we’re supposed to believe the poster is a professor of political science or history of government. Just take Diane’s word for it! No factual support necessary!

      So allow me to bring some nuance into the discussion…

      If your house is burning down, the government run fire department will come put out the fire. It does not matter how wealthy or powerful you are, you get the same fire department as everyone else. You don’t have the option of paying extra for something like a “premium” fire department. We all share in the costs of operating that fire department, whether you burn down your house every month or you’ve never caused a fire in your life. And firefighters are paid the same, no matter how many fires they put out. That’s socialism.

      If you’re the victim of a crime, the government run police will investigate it for you. It does not matter how wealthy or powerful you are, you get the same police department as everyone else. You don’t have the option of paying extra for something like a “premium” police department. We all share in the costs of operating that police department, whether you’re victimized once a month or you’ve never needed police assistance in your life. And police officers are paid the same, no matter how many criminals they arrest. That’s also socialism.

      But according to Diane, something like the fire department or the police force “does not work”.

      In fact, the opposite is true: A capitalist fire department or capitalist police department does not work. Now, allow me to support that statement by way of explanation…

      In the olden days of New York, fire departments used to be private enterprises (that’s why they’re called ‘companies’). They were paid by the local government based on the number of fires they put out. And anyone could open a fire department as easily as starting any other business.

      So why did that change? Why aren’t fire departments still private corporations?

      Answer: They started setting fires so they could be paid to put them out, thus increasing their revenue. And if two fire companies arrived at the scene of a fire at the same time, they would often brawl in the streets to decide who would have the right to put out the fire, while the buildings on fire continued to burn. (You may remember a scene like this from the movie Gangs of New York.)

      Now picture a similarly capitalist, for-profit police department, paid based on the number of ‘criminals’ they arrest. Nothing could go wrong with that, right?

      And so we have socialist fire and police departments. But one could apply the same logic to health care. If a doctor is paid based on the number of X-Rays they take, then doesn’t the doctor have an incentive to order as many X-Rays as possible? Even if they’re not medically necessary for treatment or diagnosis? That would run up the cost of health insurance for everyone.

      So maybe what we need is a socialist health care system to match our socialist police and fire departments. Unless, of course, you’re arguing that our firefighters and law enforcement officers are in some way degraded by not operating for profit…

      • Ann Rutledge

        Ghortej – do you work for the Government or are you retired? Such verbiage!! Even the liberal thought/spelling police from the early posts have run out of things to say by now.

  • eagle1e2003

    Robert, I see that you are a person who can only contribute to this form by name calling and making accusations about people you have never met or know anything about. I find people like you are in a category of your own with nothing constructive, positive or even have a logical thought, rebuttal or solution to what you you disagree with.

    Oil company’s make a lot of money and you make it seam that they keep all of it for self gratification.
    However, they invest in millions if not billions in America technology and why didn’t you mention that, is it beacuse you only like to demonize or refuse to provide if you know all the facts ? I think so.

    As far as the military yes they waste money as all the people put in Gvt. do however, does the technology and inventions such as the stealth plane that protects you and the rest of this country and other weapons to deter other countries from taking up arms against us because they hate us. Is it better to have the technology and weapons to protect this country and not use them than not to have them?

    Please explain why the rich aren’t honest and the true nature of distribution. Oh!! you must mean that because a person makes an invention and becomes rich they should be penalized. Do the rich use the tax loops the GOV. provides them make them dishonest. They use what the Govt. allows in the tax code and it gives them an advantage to keep more of their money.

    Maybe you are saying that every rich person is dishonest when filing their taxes. I believe you are one of the people who believes that you deserve the money someone else earns. You want to live in the same kind of home in the same neighborhood as a rich person so that you can make sure they get up every morning to go to work so that you can have the same things they do by living off the backs of their hard work,efforts and their non-use of the words can’t, quit and give-up. Maybe that is what they are rich. Maybe you should also take those words out of your vocabulary.

    That’s right you deserve a higher pay just because you show up to work and do the same job at the rate you were hired without having to do anything that would benefit the company so that you could be recognized for your efforts to increase profit or productivity or come up with ideas that would be of benefit to your employer so you can earn a higher pay and a promotion.

    Does this also mean that every student who works hard. studies and earn a 4.0 GPA should give up a point or 2 for those that party, skip classes and never cracks a book. If one had a 4.0 GPA and another has a 2.0 GPA then you believe a point should be taken from the 4.0 GPA student and given to the lazy one so they both would have a 3.0 GPA? WOW I am simply amazed that this country has people that thik that way. It is truly sad for this countries future.

  • yodaboy

    Because this is a lie.

  • yodaboy

    That is part of what the supreme court shot down though. In the original wording, the expansion of Medicaid was mandatory (from what I have read).

  • yodaboy

    The tax penalty the Supreme Court ruled as a tax, thus I don’t think there are any exceptions, the reason the expansion of Medicaid was presented as it was.

  • Ann Rutledge

    And maybe you wear panties.

  • Ann Rutledge

    I heard the insurance companies take all that “undeserved” “extra” money and put it in a bucket at the end of the rainbow. Bet you could find it if you looked.

  • yodaboy

    I could not have said it any better myself. Someone needed to point that out here Robert. Add Ann Rutledge and Paula to your comment.

  • Mike907826

    Robert, that was rather rude as well as incorrect. Eagle isn’t suggesting that we let Larry die, like a sociopath would, he is simply stating that the ACA just added costs to taxpayers without reducing the true problems with the old healthcare plan. Today Larry’s bill would get written off and result in higher costs for us, with ACA, Larry will pay a little but taxpayers will pay a chunk of the insurance, pay for more government employees to administer (IRS agents, etc) and end up paying any write offs for costs he still can’t afford to pay. The issue is that although Larry will pay a little (vs nothing today), the net cost to taxpayers is higher due to adding insurance company (profitable) and a lot of government administrative tasks (labor intensive) into the mix. Eagle is also correct in stating that ACA won’t stop medical related bankruptcies, as the co-pays and deductibles are so high that a poor person and most middle class people would likely go broke if something costly comes up. There will be out of pocket limits that might help reduce some bankruptcies, but those only kick in when something very major goes wrong. Most paycheck to paycheck Americans would still go bankrupt or at least default on the smaller co-payments due before they ever come close to the limit. Many of these people are in debt and barely making it as it is.

    In addition, your standard party line of “the oil company subsidies” and “military spending” is tired. We are all sick of oil company subsidies, but guess what, the politicians (both Dem and Rep) are in bed with the lobbies and they aren’t likely going anywhere soon. If that were the case, Obama could have possibly done it when he had free reign in his first term (when he passed ACA). Despite the talk, the dems have friends in the industry too and don’t want to rock the boat.

    As far as military spending goes, I think we all enjoy having a fairly safe place to live without much chance of getting hit by a rocket or an IED on a regular basis, a “luxury” millions of people around the world do not enjoy. Despite the need for a strong military, I do agree with you in that there is much waste and likely fraud going on in the defense industry. No bid contracts, overcharging, under-delivering, lobbyists, political pork, etc. Cutting defense is not an option, cutting waste and fraud is a necessity. It might seem like a good idea to just slash costs across the board, however, that would do more harm then good. We would be switching a million service members from payroll to unemployment. That would reduce costs somewhat since unemployment pays less and has no benefits, but taking millions of shoppers out of stores would reduce tax revenues. We do need to remove the waste and run it as lean as possible, but it has to be scaled back carefully to avoid crashing the economy.

    In closing, I hope my explanation helps you to understand a moderate conservative viewpoint. Most of us aren’t wanting to let the poor die and give our money to the rich, we just see the ACA as a poor solution that simply adds a lot of costs while offering minimal help to the working poor.

  • Rafael Mercedes

    Don’t understand the big deal some ppl make of getting health insurance… it’ll be the law just accept it. Can someone buy a car, or a house without insurance….. I don’t think so.. insurance is protección for all us that is why they sell it. Just pay your share and be glad you have it…

  • happyfred

    How much is Stacy being paid out of tax dollars as a political prop?……..I bet it is quite lucrative……….and non-productive like all government jobs.

  • SargentB65

    Stacy, I can’t seem to agree with your explanation to Larry. Changes under Obamacare, increase premiums, co-pays, deductibles, etc.
    Then you add in the Doctors, Hospitals, Clinics that were dropped by the insurance industry, along with Institutions that can’t afford to be in the ACA, because of the loss of income, means diminished care with less medical personnel. Just think, if your one with a illness that is potentially fatal and just lost your insurance because your policy doesn’t meet ACA requirements, but yet it’s been paying for your care from the time it was diagnosed. Your new ACA policy won’t pay at the facilities and Physicians, you use, now instead of a short drive for treatment you must travel 100 miles or more. Your Primary Care provider is no longer available to you, now your wait to see the doctor for an illness, goes from days to weeks, since there are to many patients instead of 15/20 minutes with the doctor you get 5 because of the amount of people waiting. Oh, yes and 600 million dollars for this came from our medicare so now this account is diminished {not the first time Washington has raided this account, now it is running out of money]. Stacy, please believe we will still be paying the bill for people like Larry, with the higher premiums, co-pays, and deductibles we’ll be stuck with.

  • pasko varnica

    Sandy, you ask and underline to boot: Why are you so angry about?
    Allow me to explain: the case you bring up is a valid one; there is no doubt that there are other situations like Larry’s. I am angry about the fact that instead of resolving Larry’s problem, obamacare has taken over 1/6 of our economy and has drastically changed everyone’s health insurance. Has obamacare really solved Larry’s problem? I am not so sure. What I am sure is that under the guise of solving Larry’s problem, government has taken over my health insurance. That’s why I am angry.

  • myponderings

    Hi Stacy. I liked your article on this subject. I think you provided clear and thoughtful information as to how the system works and is supposed to work and the logic behind it, including the need for all to participate. This article is why I registered to be able to make a comment. I was sorry to hear about Robert in Florida. I, like you, thought there must be some mistake. I think you make the essential points very well: that we are better together, and we all need to play by the same rules. I also think it would have if reference hadn’t been made to a specific party involvement. General reference to responsibility of the state leadership would have been enough, and would have avoided a political overtone.

    I am concerned about the way the transition is unfolding, and I am concerned that it will break the national bank (us). It seems littered with implementation problems. it relies on all to participate, and the participation rate is very low. It is also making health care less affordable for some (I am one) so health care can be affordable for all. Yet i also think it comes the closest to making health care accessible for all. Something needed to be done to make insurance companies provide healthcare for those with previously existing conditions. Something needed to be done to make health care accessible to those who can’t afford food, clothing, shelter AND health care. We have traditionally relied to a great extent on businesses to provide it as a cost for doing business, which unfortunately puts some small businesses out of business, and doesn’t reach those who aren’t able to work for whatever reason. It seems that the only way for everyone to be reached and for everyone to participate is through a government wide comprehensive health program., which spreads the burden for health care we all need and want to be available to us when we need it, much like our taxes pay for our law enforcement and safety services. Even though this system has made health care less affordable for me, I still support it, because health care and insurance isn’t only about me. It’s for all of us. I only hope once the implementation problems are worked out and we have made it through the transition process that the affordability calculations are correct and that we as a nation can afford it. Because when tragedy strikes, we as individuals usually can’t.pay for the health care we need on our own without insurance.

    In case any of your are wondering, I am not a Republican or a Democrat. I am deeply disappointed by the partisanship in our country, as are many of you. I have recently registered as an Independent with no party affiliation to send a message hopefully, that our party should come second, and people should come first.

  • Donna Long

    Where do you think that “free Federal money” comes from that Florida and many other states refused? There is no free money…it all comes from tax dollars. And there’s not enough tax dollars to provide all the “free money” that’s promised, which means more deficit spending. What could possibly be wrong with that? Oh, and when the Federal government decides not to provide the money in the future, the states will be expected to come up with it. I don’t blame them for refusing the offer!

  • eagle1e2003

    If you own a car it is required to have auto ins. If you don’t own a car you are not required to have ins. This also applies to a home. I have to have ins. just because I’m alive Really? Does a rich person who can afford to pay medical bills out of their pockets have to have ins, Really? Your analogies make no sense. If I don’t have ins. I am choosing to die really? LOL

  • Mikey_W

    Funny how quickly “don’t make the rest of us spend OUR money on your health care, Larry” becomes “free money” when the REpublicans don’t want to expand Medicaid. Where exactly does that “free money” come from, Stacy?

  • JimK

    Stacy, I don’t follow your reasoning here. In the first example, you talk about people who abuse the emergency room privilege costing the rest of us, and that is the reason we need Obamacare. The things I don’t understand here: first, Larry is still going to have to file bankruptcy if he has an Obamacare policy; his deductibles are an unaffordable $6500. Plus, he will be liable for at least 20% more of the total bill, thus being on the hook for close to $50G.
    And that leads to part two, which is already happening: people are paying a lot more under Obamacare than they are if they have to pay for the guy who abuses the emergency room. How much more does the average policy cost for that type of abuse…5%, 10%? People are now having their policies go up 100-200% since the inception of Obamacare. I don’t know about you, but I’d much rather pay the 5-10%.
    Also, you talk about being forced to pay for others. Being a man, why does my insurance have to include coverage for pregnancies and such? Who is being forced under Obamacare now?
    Another thing you mentioned in the second story is the Medicaid issue in Florida. You discuss how the Republicans blocked efforts to expand Medicaid by not accepting…and your exact words are…FREE MONEY. Are you serious!!?? Where do you think that ‘free money’ comes from? Trees? I’m sure you are aware that money is coming directly out of your’s and my pockets, aren’t you? So once again, who would be forced to pay for others under this expansion?

  • ghortej

    Is that all you got out of what I wrote? If so, you clearly missed the point.

    I wasn’t discussing where the funding for volunteer fire departments comes from (by breaking down municipalities by direct government funding vs. tax credits for volunteer firefighters, etc). I was explaining that they are not for-profit corporations operating under the principles of capitalism. And if they were, they would not be as beneficial or effective.