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re: What are the economics of Affordable Care Act?
Posted on 10/1/13 at 5:51 am to Swankie
Posted on 10/1/13 at 5:51 am to Swankie
quote:Frankly, so is every actuary in the industry.
I'm interested in the economics and facts of the program
Effects will be variable depending on industry, age, income and other factors. Economically the ACA is redistributional. In that sense it should have the much same effect as a progressive 10% corporate/personal income tax increase (~$200B/yr, $2T/10years). Under ACA, young healthy policy holders also shoulder an increased burden of older sicker patient costs.
Those businesses which cannot offload ACA costs to employees will take a hit. ACA adds costs directly with increased policy expense, and indirectly in dealing with regulations and penalties. As with any corporate tax, those costs, where possible, will be passed through. Could add another 2% or more to inflation, a near double in this market.
Health insurance carriers will be pressured. IMO, investment in that sector is at risk. ACA limits profitability via the 80% rule. It increases actuarial risk due to variance in young healthy participation. With fewer healthy members, costs will rise. Carriers' policy options are limited under the ACA, also rendering cost of coverage more expensive.
Hospitals, Clinics, and Medical personnel will be affected. How significantly, is anybody's guess. Hospital administrators remain in a quandary about revenue effects. Layoffs have commenced. Physicians are closing practices in favor of employment usually via hospitals. Economic effects via the medical industry? I'd guess, not much. Leadership transference from physicians to administrators and politicians is another thing entirely. Effects on the public will eventually be significant. My suspicion is hospitals and doctors will see little economic change when the dust settles.
Miscellaneous pockets include Big Pharma - winner. Med device makers - losers.
In general terms of healthcare sector performance and investment, track Medicaid expansion. There should be an inverse relationship between Medicaid growth and HC sector profitability.
Posted on 10/1/13 at 8:40 am to NC_Tigah
Nice analysis. For many Americans ACA will simply be a redistributive program. They will not notice a material change in health care's share of the economy. It will effectively be a zero sum game to those people. Whether they are winners or losers in the game will be apparent to them real soon. Obama, and the Democrats, bet that the winners will outnumber the losers and reward them in the voting booth.
The Democrats realize they missed the mark, and will likely lose their bet. Thus, Obama has been trying to rig the game to change the perceptions of who is winning v. losing until after the next election.
The Democrats realize they missed the mark, and will likely lose their bet. Thus, Obama has been trying to rig the game to change the perceptions of who is winning v. losing until after the next election.
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