Obamacare is not just the answer to the uncompensated care problem

A common argument is that we need the Affordable Care Act to address the uncompensated care problem. Maybe so, but it’s pretty clear from the numbers that that argument is incomplete, for the ACA costs far more than would be required to solve that problem alone. Effectively, the ACA suggests that we, as a society, think that individuals should participate in financing far more than their potential uncompensated care.* Here are the numbers:

From Jay Bhattacharya and colleagues (PDF):

Because the total cost of uncompensated care in the United States is currently around $56 billion, the total tax would be no greater than this. Indeed, current taxation is likely already covering about $43 billion of this amount, suggesting that the incremental tax would be modest. […]

Uncompensated care for the uninsured is estimated to have cost $56 billion in 2008. [] Up to $42.9 billion may already be indirectly covered by public funds such as DSH payments under Medicaid and Medicare. Presumably this is already included in current Medicaid costs. As a result, perhaps as little as $13.1 billion may need to be financed by our safety-net tax. [Links added.]

From the CBO:

In its May 2013 baseline projections, CBO projected that the insurance coverage provisions of the Affordable Care Act would have a net cost to the federal government of $1,363 billion over the 10-year period from 2014 to 2023. (The ACA includes many other provisions that, on net, will reduce federal budget deficits. Taking the coverage provisions and other provisions together, CBO and JCT estimated that the ACA will reduce deficits over the next decade.) As a result of the Administration’s announcement and recently issued final rules, the net cost is now estimated to be $1,375 billion.

By my calculations $1,375B over ten years is $137.5B per year, which is larger than the additional $13.1B needed to finance uncompensated care or even the full $56B cost of uncompensated care. Consequently, though the Affordable Care Act is intended to address uncompensated care financing, it clearly does far more than that.

If we merely wanted to tax Americans to finance Emergency Medical Treatment and Active Labor Act (EMTALA) care, it’d only cost us another $13.1B per year or about $57 per adult per year. Compare that with the ACA’s first-year penalty, the minimum of which is $95 for those not exempt due to hardship.

* It only suggests that. Many people do not agree that individuals should have to finance as much as the ACA requires.


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