Question

Keynesian model promotes increased government spending, which implies government intervention designed to reduce taxation in order to enhance demand. Let’s focus on ACA. It seems that some argue that the government should not be given the right to establish any controlling mechanism in the area of health insurance. Remember, under social control, the government has gotten the right and responsibility to maintain fairness and equity through sound regulations. If private firms would be allowed to fix prices unregulated, would there be any guarantee for premiums not to be skyrocketing? What would be the source of legitimacy for private insurance companies to operate without government intervention? We should acknowledge that unless there is pertinent policy (designed by the government), nothing can be done in orderly fashion. How would you explain that the healthcare enterprise could be functioning properly without government intervention? Remember, insurance is business. And the Constitution is the law of the land, based on the Commerce Clause, which gives Congress the power to regulate business. Thus, what is wrong with government intervention? Of course, it has been reiterated that ACA contains limitations. Thus, there has been very strong urge for amendments. How would amendments can be made without government intervention? How would you address these concerns?

Answer 1

Govt cant inervain in all private market issues. there are some boundaries. Sometimes it is seen that free market power is more effective than govt policies. For example a market fails due to assymetric information related to that market. One chronic information of assymetric problem is that people who most want health insurance are actuallly sick but company does not run in this way because it loses if sick people are buying this and it makes profit on its customers who dont get sick. So if the mejority of its customer are sick then its rates will be skyrocket, chasing away the healthy and wrecking the market.

The Govt. can help in this situation. Policy makers can make it illegal for a person to tell a health insurance company that he is well when actually he is sick. They can require a money back gaurantee. Insurance company reqiures health exams before writting health insurance policies. Information assymetries are the legitimate area of Govt. invovement in the economy. But regulation is not the only or sometimes the best to solve the problem.

The ACA contains limitations. But some ammendements can be made without govt interventions. They are as follows :

1. Legislative approval required.
2. The individual and employer coverage mandate.
3. Interstate Health Compacts.
4. State Nullification.
5. Restricting use of Navigators.