Examples Of Crowd-Out Of Health Care Reform

The Crowding-Out of Private Health Insurance:
An Economic Analysis of the Obama Administration Health Reform
Gabriel A. Valenzuela
ECO 313 (Section 03)
Grand Valley State University

Abstract
This paper presents and evaluates some of the changes currently taking place in today 's healthcare environment. In particular, it focuses on the current Obama Administration Health Reform, and how the economic theory of crowding-out is exemplified in its practice. The paper articulates that some of the changes occurring with the healthcare reform are positive, such as extending coverage to approximately 32 million Americans. However, the novel reform mimics that of earlier reforms such as SCHIP and Medicaid, in
However, although the employee is aware of their condition, and wait until after they obtain their plan to seek medical treatment. Now, let’s say that one-hundred additional individuals do the same thing. Doing so will place a strain on the private insurance companies, in such a manner that will eventually cause some of these insurance companies to go bankrupt. Hence, by not excluding those with pre-existing conditions is inherently creating a crowding-out effect because the private sector is financially strained (causing the supply curve in the health insurance market to move to the left); hence, raising the cost. The government here has the upper-hand because unlike private insurers, the government cannot necessarily go bankrupt. In the worst-case scenario, the government when faced by a financial crisis can do one of three things: (1) print money, (2) raise taxes, or (3) borrow money in the form of bonds. Insurance companies and health plans are concerned about their financial bottom line – it’s in their best interest, therefore, to exclude people with a pre-existing condition, impose a waiting period before coverage starts, or charge higher premiums and out-of-pocket
There is also sufficient evidence presented that the Health Reform passed by Obama Administration exemplifies crowding-out of individual private insurance companies. This in turn has substantial ramifications to the American citizens, as higher costs are imposed on individuals and households. This in turn creates a hardship for these individuals to seek the help they need, creating a paradox for what the reform was trying to do. As physicians are potentially facing lower incomes, it becomes more of a game of money than of the quality of health care provided. Furthermore, the entitlement programs we have are crowding out private insurance, increasing the costs, and reducing the quality. In other words, the notion of the health care has shifted its sights from being about the patient to now earning a substantial income. The obvious solution to helping alleviate the problem does not necessarily have to come from the government sector, but rather from us as citizens. If we gradually take the right steps in improving health that we actually have control over, then perhaps some of the negative ramifications of crowding-out could be