Government Shutdown, Obamacare, and Potential Impacts on the U.S. Economy

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Republican Senator Ted Cruz is one of the most vocal opponents of Obamacare. Credit: Gage Skidmore

Republican Senator Ted Cruz is one of the most vocal opponents of Obamacare. Credit: Gage Skidmore

People might not think that, but the Republicans have all the cards. And this is the time to get rid of Obamacare. This is the time to make the great deal — Donald Trump

The United States government has officially shut down, as the bitterly-divided Congress was unable to agree upon a continuing resolution to fund operations going forward. Once a simple, almost rote function, the inability to produce a continuing resolution is due in large measure to a battle between intransigent opposites: House Republicans and Senate Democrats are in conflict over the sweeping, historic Patient Protection and Affordable Care Act, signed into law by President Obama on March 23rd, 2010.

Given that the law passed both the House and Senate more than three years ago, why is there an ideological fight going on now about the law? What is Obamacare’s potential impact on our economy?

Shutting Down the Government Over The Affordable Care Act

The landmark health care reform bill (colloquially known as ‘Obamacare’), is not universal health care, but it’s close. According to the Congressional Budget Office, all but about 30 million people in the U.S. will have health insurance by 2016. If so, this means that 92% of the projected 325 million population will be covered, up from 83.7% in 2010.

Obamacare offers four tiers of plans: Bronze (covering 60% of out-of-pocket costs), Silver (70%), Gold (80%) and Platinum (90%). As to be expected, the more comprehensive the coverage, the higher the premiums. While older uninsured people will likely rush to sign up, the economics of the program require younger, lower-risk people to enroll as well, a group who frequently roll the dice and don’t obtain coverage, perceiving themselves to be healthy enough to take the risk.

The program, as constructed, carries the following key benefits:

  • Children can remain on a parent’s existing plan until the age of 25.
  • Federal subsidies are available for those earning within 400% of the poverty rate ($93,700 for families, $46,021 for individuals).
  • There are no annual limits on healthcare expenses.
  • Insurance companies can’t drop individuals who are sick.
  • There can be no denials of coverage for preexisting conditions.
  • There is a strong focus on preventive services.
  • There is a large improvement to women’s health services.
  • There are reforms to the healthcare industry to cut wasteful spending.
  • There is improved care for seniors.

On the surface, these features and benefits would seem to significantly augment an existing system that even foes admit has serious cost-containment problems, along with enrolling millions of uninsured and under-insured people.   If so, why is there such a bitter fight over implementation of the plan, which will see its online marketplace (otherwise known as ‘exchanges’) available for consumers on October 1st?

Obamacare Debate Between Republicans and Democrats

As with almost everything these days in Washington D.C., it comes down to two main battle lines: Philosophy and money.

Although not government insurance — private insurers will be offering and writing the policies — Obamacare will nevertheless be administered by the government, which is a basic philosophical problem many have with the program.

With a budget deficit still extraordinarily high and the national debt approaching $17 trillion, the most conservative faction of the GOP in particular has been railing against sizable spending measures, believing instead in the urgent need to shrink the size of the federal government.

High atop their list is Obamacare, which conservative columnist David Limbaugh termed an “abominable legislative monstrosity”. The legislation passed in 2010 with no conservative support, and in the following three years, has survived dozens of unsuccessful Republican-led efforts to repeal it.

The second main point, which intersects neatly with the first, is money. Originally pegged at $940 billion over the next ten years, the Congressional Budget Office has upped its estimate of Obamacare’s overall cost to $1.76 trillion. In a critical moment in U.S. fiscal and monetary history, opponents simply do not believe the federal government should be taking on this burden. Note that most of the costs are offset by savings in other areas, and as discussed below, the net effect may end up being positive in terms of the budget deficit.

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