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PPACA or "Obamacare"

The Affordable Care Act, also known as "ObamaCare," includes an Individual Mandate requiring people to have health insurance or pay a penalty. It also prevents denial of coverage due to pre-existing conditions, creates state-run Insurance Exchanges for easier policy comparison, and provides government subsidies for lower-income individuals. The Act's costs are primarily covered by increased Medicare taxes on higher incomes. Created by Sal Khan.

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  • leaf green style avatar for user Bryce
    Why is it that the United States spends so much more per person on healthcare (compared to say European countries) yet we have what is universally regarded as a mediocre system?

    According to OECD the U.S. spends 17.4% of it's GDP on healthcare, which ranks #1 in the world. 2nd highest is Netherlands at 12%. We spend so much more yet we don't have universal coverage, why is this?
    (126 votes)
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    • blobby green style avatar for user Jeff
      The problem is the existence of health insurance! Whenever the end-user of a good or service doesn't pay the full cost of that good or service the price inflation is greatly exacerbated. Without the insurance to pay vendors would be forced to charge what people could afford out-of-pocket. Corrective eye surgery is a great example. Insurances doesn't cover it and it's price has fallen dramatically over the last decade, while procedures covered by insurance have had their costs vastly inflated.
      (154 votes)
  • female robot grace style avatar for user Jade
    Why do Europe, China, New Zeland, and other countries get free healthcare but America doesn't?
    (62 votes)
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    • leaf green style avatar for user FinallyGoodAtMath
      The representatives of those countries decided to make healthcare socialized. When we socialize something, it means we share the cost, and we all receive the same benefits. The shared cost results in higher taxes to pay for the healthcare, so a country of five people will each pay a dollar in taxes to pay for one person's surgery rather than that person paying $5 because we are worried that person does not have $5. This will lead to more people using healthcare and longer waiting times, but it also leads to longer life expectancy because people receive healthcare that they otherwise may not have been able to afford.
      (112 votes)
  • female robot grace style avatar for user Candice D.
    The car insurance analogy doesn't seem to work for me. First, car insurance requirements are done at the state level and not the federal level. Also, most car insurance mandates just require the minimum insurance to make sure you are not a liability to anyone else. If the Individual Mandate required a simple plan that meant you were no longer a liability to everyone else that would make sense. Unfortunately, the mandate forces people to buy more than they may want and more than the burden of being uninsured places on the rest of us. That would be like requiring everyone to have collision and replacement vehicle coverage, which are not required by any of the state DMV's (I believe simple liability and bodily injury coverage are all that is required). Sorry, it just didn't seem like a balanced analogy. Can someone provide an analogy that makes things clearer? I guess my question is, "Why does the healthcare law place such strict guidelines on what can and cannot be covered?"
    (23 votes)
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    • blobby green style avatar for user Paul Carney
      You said, "...car insurance mandates just require the minimum insurance to make sure you are not a liability to anyone else."

      Let us say that you fall off of a roof, and have no insurance. Presumably, someone will call 911, and an ambulance will be dispatched. You will be taken to an ER, X-Rayed, CAT scanned, place in a body cast and placed in a room for days to weeks. Who pays for all this? Your treatment will be at the expense of either the taxpayer or other sick people who have insurance.

      You are not required to carry collision insurance on your car, because if you total your car, no one else will be expected to buy you a new car. If you have no insurance and cannot pay cash in advance, someone else must either pay for your care or leave you to die. That is the reason for requiring health insurance. It attempts to bring more people into the insurance pool to more equitably share the cost.
      (2 votes)
  • leaf green style avatar for user arjunbendre
    Hello. I was just wondering how the U.S. emergency system is structured. I live in the UK, and over here, when we have a medical emergency, we dial 999 and then an ambulance arrives, that takes us to the nearest NHS (National Health Service) hospital. The NHS is completely free for every citizen of the UK, therefore there is no question of whether the patient has got a health insurance policy or not, etc.. How does it work in the U.S.? I know that you dial 911 and then an ambulance will arrive, but does the 911 operator call the ambulance of the nearest hospital? Because all hospitals are independent, right? Or does it ask the person who dialled which hospital they want?

    Thanks in advance!
    (6 votes)
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    • blobby green style avatar for user Jan M Banicki
      in the US we dial 911 and connect with a dispatch operator who will send an ambulance and fire truck for a medical emergency or police if a safety emergency. The patient will be transported to nearest hospital if needed. If patient is stable and not in danger the next question is what insurance do you have.
      (5 votes)
  • blobby green style avatar for user Anirudh Shankar
    why does new zeland,uk give free healthcare and usa doesnt give
    (3 votes)
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    • leaf green style avatar for user jason.j.shaffner

      Neither New Zealand nor the United Kingdom "give free" healthcare. Both have tax funded basic healthcare, which differs from the United States which has, for slightly more than half the population (54%), a private pay system. New Zealand has shifted towards private pay healthcare for an increasing share of its procedures. The primary issue is cost, and more specifically, cost as it relates to GDP. The United States spends the most per person and per GDP than any other country. If this were simply shifted from 54% private pay to the government, we would be bankrupt in short order. New Zealand, by way of example, has the lowest pharmacological participation rate of 1st world countries. The cost of prescription medication is one of the more significant causes of growth in the cost of care, most particularly in the United States. The short answer is that the United States "could" provide tax funded basic healthcare like other countries, but the change would be complex, expensive and uncomfortable for some.
      (11 votes)
  • aqualine ultimate style avatar for user josie.balistreri
    As a part of the "no fee for pre-existing conditions" why would insurance companies be able to charge people more or less based on their geography?
    (5 votes)
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    • blobby green style avatar for user Beth Cortelyou
      Hospitals charge more in rural areas than they do in urban areas, since rural hospitals are further apart & many essentially have monopolies, meaning they can set pretty much whatever prices they choose. Doctors are also less likely to want to work in rural areas, so rural hospitals have to offer higher pay than their urban counterparts in order to attract doctors. Because health care in rural places costs more, insurance companies have to pay more for their customers' care, and they pass that cost along to the customers. (It gets a bit more nuanced than this, but it's all based off the same basic principle that health care is more expensive in some places than in others.)
      (3 votes)
  • piceratops seed style avatar for user Amelia
    How are poor people going to get the money to do this? Will they get fined?
    (3 votes)
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  • blobby green style avatar for user ahmed s.
    will a person who doesn't have a job still be penalized? And if so, will the money paid in penalty be counted towards any emergency that happens?
    (3 votes)
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    • blobby green style avatar for user lee pearson
      It's my understanding that some of the rules depend on the state that you live in. I've heard there are a couple of states that count the entire households income to qualify for benefits. So even if they are not related to you and are merely roommates, this could be a penalty for you. Also if you are living at home, even if you are paying some rent, some states could include your parents income as a qualifying factor. There is usually a lot of info online if you put in your state and then Medicaid. Good luck.
      (2 votes)
  • starky seed style avatar for user abigail song
    Does Obamacare actually refer to President Obama?
    (1 vote)
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  • blobby green style avatar for user Nikki Fox
    What does this do in regards to pre-existing state health care like Oregon Health Plan?
    (3 votes)
    Default Khan Academy avatar avatar for user

Video transcript

Theres been a lot of talk about the Patient Protection and Affordable Care Act (PPACA) often referred to as "ObamaCare"; usually by those that are not a big fan of it. And my goal here is to not take any political sides, and hopefully give an overview of what all of the debate is about and what this 'Affordable Care Act' is all about. and I'm going to start with the most controversial part, and this is the 'Individual Mandate' And this is the idea that you either have to get insurance, or pay: a penalty; or a fee; or a tax. -Penalty- Which is now being referred to as a tax by many folks. And the idea here is that there are obviously many folks who are uninsured right now, and when they get sick especially when they get very sick they still get healthcare. In particular they will go to the Emergency Room. They will go to the E.R., and that is quite posiibly the most expensive part of the healthcare system to interface with. So there's kind of a moral argument here, that- 1) These people are getting sicker than they need to get if they had insurance. e.g. getting preventative care and not getting that sick. Then there's a financial or, I guess you could say, a fairness argument: that these people are getting sick, going to the E.R., and they have to be given care at that E.R. The Hospitals bear those costs, and then eventually recoup those costs by charging more for all sorts of other services. [These costs] go back to the people who are paying for the healthcare. So, if you have an Individual Mandate it will clear things up a little bit. People will have to essentially pay for the healthcare they are already getting. Now, the argument against the 'Individual Mandate' is that this is the Government putting into law that people *have to buy something*. In particular, that they have to buy health insurance. Now, the counterargument that many people make is that there is something similar going on with car insurance. If you want to drive in most states, you have to buy some type of car insurance or at least show that you have financial abilities to pay any liabilities you might have if you get into an accident. Now the 'Counter-Counter-Counter-Argument' to that is that, driving is something that someone chooses to do. That you do not have to drive, while in the case of health insurance, this is something that every person in the country is being forced to [purchase]. I'll leave it to you to decide where you sit on that, and what balances what other issue. Now, obviously, if you're going to decide whether you want insurance, or whether you are going to pay a penalty/tax, you have to figure out how high that penalty is going to be on you. Or if you want to figure out if this is a fair situation. You have to think about high that penalty is going to be. And the current provisions say that by 2016, which is when the full penalties take effect, you are going to have to pay the maximum of either 2.5% of your income, or $695 for an individual, or $2085 for a family. And there are exceptions, and this whole individual mandate won't apply to you if having/getting insurance will cost you more than 8% of your total income. or if you belong to a religion that does not participate in the healthcare system, then it doesn't apply. So you will never have to pay more than 8% [of your total income] to get an insurance policy. But these are the general penalties; If you made $100,000 and chose not to get the insurance, you would pay $2,500 (2.5% of income, and is greater than the minimum penalties). If your [family] makes $50,000, then the 2.5% [$1250] would be less than the [family] minimum, so you would pay $2085. Now the other provisions of the PPACA are based around the idea that, "If we want people to get insurance, - then we need to make it easier for them to get insurance" The biggest deal, at least in my mind, is this one covering Pre-Existing Conditions. Right now, if you have a Pre-Existing Condition, e.g. Cancer, and you do not have insurance, or your employer does not cover it - or perhaps you are unemployed - and if you try to get insurance on your own, you are likely to be denied. If you are offered insurance, it will be ridiculously expensive. This is because the insurance company knows that they're going to take a huge loss on paying all of your medical expenses. The PPACA says that you can no longer base the premiums, or whether you will or not give someone insurance based on Pre-Existing Conditions. People will be charged premiums, which what you pay to receive the policy, based on age and geography. So if you have two 40-year-olds, and one of them has the misfortune of having cancer, the other not having any pre-existing conditions; and they both live in, let's say, in Virginia. Under this, they will pay the exact same amount for insurance, the same premium. These other two points are just to make it easier to get insurance. Right now, if you've ever tried to get insurance, it can be really hard to compare and contrast policies, and to really understand what you're getting and what you're not getting. So this part of the Act says that every state will set up one of these Insurance Exchanges, which will allow for more transparency in terms of buying and selling policies. And then this final part here, -though this is just an overview, I'm not covering everything, not all the details- is the idea that the Government will also subsidize people getting policies, especially if they are in lower income brackets, or in more difficult financial situations. Now on top of this, if you're deciding whether or not you support things, if you're saying, 'This might be a good idea', or 'This is a bad idea' because you don't like the government forcing things like this, there is also the issue of the Cost. Now this whole thing, even thought there might be savings in terms of lower medical care, because people would get preventative healthcare, there is still a Net Cost to this. It will primarily be paid for by an increase to the Medicare Tax for high-income brackets. So it's really going to be larger Medicare taxes on people with larger incomes. This is estimated to generate about $200 Billion a year, (or $210 Billion, there are different estimates) but that's going to bear most of the costs, and on top of that, there are some extra fees on insurers, as well as what's called an 'Excise Tax', which tends to be a large tax on a specific type of policy, which are referred to as 'Cadillac' policies. These policies are very very very generous. This will be used to make up some of the cost of all this. Once again, I'm not going to take any political sides on this, but hopefully this gives some clarity about what people are actually debating.