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Government Annexation: The New American Way

Hans Arcand

Southwestern College

Managerial Economics

BSAD 320

Mary E. Marshall

March 31, 2013

Government Annexation: The New American Way

Socialism can be loosely defined as a system or structure of society, in which the aspects of that system or structure, are controlled and regulated by the government. This sounds a lot like the bill introduced and signed into law by President Obama in 2010: The Affordable Care and Patient Protection Act, commonly known as ObamaCare. Under this new legislation, the health care reform has been completely overtaken by the federal government; thus allowing the government to control one of the most influential factors of the American way of life. This legislation proposes a lot of new changes to the American standard and will greatly incentivize joblessness, spread economic uncertainty and cause a standstill in employment rates across the country. “The problem with socialism is that you eventually run out of other people's money.” – Margaret Thatcher. In reference to our current fiscal standing, we have already run out of other people’s money ten times over; this bill is going to be funded by Chinese renmimbi under the blanket of a further-inflated American dollar.

Small businesses have been called the backbone of America by many influential people, including the president himself. A major advantage of this new law is that a small business with less than fifty FTE’s (full-time employees) will be exempt from any fines that could come about because of not offering insurance to employees. The major disadvantage of this law is that a growing small business that wants to fulfill its potential will be run over in its tracks. As soon as a business reaches fifty employees, it will be mandatory for that business to offer affordable insurance; if it is not offered, the company can face up to $2,000 per person in fines, minus thirty. For example, a business has 50 employees, so 50-30 = 20 employees * $2,000 = $40,000 worth of fines per year that the business does not provide coverage. This new law will prevent any small businesses from wanting to expand because of new emerging fines. Furthermore, these fines will force drawbacks on employee hours and cause nation-wide hiring freezes. Employee hours will be cut because businesses will not be forced to offer affordable health insurance to the part-time employee, yet the part-time employee will be fined if they do not obtain coverage. For example, my wife is a waitress and she works four to five days a week and puts in around thirty-five hours. The restaurant has mandated that no employees shall exceed twenty-nine hours per week, or they will be fired. This is directly hurting low-income Americans, such as myself, in an effort by our leaders to help low-income households! In terms of managerial economics, the marginal revenue gained by working thirty-five hours is less than the marginal tax that will be given because of the extra few hours. Another great part of this act is that small businesses that do provide affordable health-care can still be fined; this is made possible by the employee going to an “exchange” within the state to obtain lower-priced health insurance. Basically, the government is trying to make it where the company has to provide extremely low-cost insurance, so that the employee will not seek federal assistance. This sounds great, but it comes at the costs of small business owners.
The Affordable Care Act will not only be a giant grievance to small business with over fifty employees, the states will also feel a devastating effect on their rights and their budgets. The Act mentions that the states will need to open exchanges, where citizens can come to sign up for federally assisted plans. These exchanges will have to be manned by a staff and will exhibit a large amount of administrative costs. These administrative costs will be coupled with the extra costs associated with opening Medicaid to able-bodied citizens who make less than 133% ofthe FPL (Federal Poverty Limit). This will incentivize joblessness because a person that makes less than the FPL will get free healthcare and a person that works and makes over $15,283 in a single-person household will have to pay for their “affordable” healthcare and pay a large deductible. The extra costs associated with the eligibility of new enrollees will be cost-shared between the federal government and the states for an unacknowledged amount of time. When the federal government decides they do not want to foot the bill anymore, the states will have to take complete control of the additional administrative and enrollee fees associated with the extended amount of beneficiaries. “It is also important to emphasize that the total cost (federal and state) of the Medicaid expansion—which, based on CBO and CMS estimates, will likely be between $400 billion and $500 billion over the first seven years—will be shouldered by taxpayers.” (Haislmaier & Blase, 2010, p. 5) This means that we will feel a dramatic increase in our taxes over the next couple of years to fund a plan that is controlled by the government to fund other able-bodied citizen’s healthcare. This redistribution of wealth is an intial move to try and gain government regulation over the basic necessities of the country.

“Doc Fix” has been a long-standing problem that is addressed in the new legislation. “Doc fix has become congressional slang for legislation that to cancel automatic reductions in Medicare physician payment rates.”(Haislmaier & Blase, 2010, p. 6) There was legislation passed in 1996 to reduce Medicare spending that took the GDP and the percentage change in Medicare paid to physicians and the sum is the SGR (sustainable growth rate). The SGR is a relatively low percentage, currently thirty-two percent of what the physician would normally receive from a patient. Congress has been battling over this issue for some time now and have bowed their heads every year when they have to debate this issue. Every year since 1996, Congress has voted to postpone the legislation to pay the physicians the full reimbursable amount in fears of physicians not accepting Medicare patients. The Affordable Care Act outlines a plan to resolve the “doc fix” issue by mandating that Medicaid payments will pay the PCP’s (primary care physicians) one-hundred percent of what they are owed, and the federal government will cover all associated costs above what the current SGR is. The problem with this is that the plan is only a two year plan; so when the time runs out and the budget is not able to cover additional expenses, the states will be left with the burden of covering 100% of the additional costs. This is a feat that congress has not been able to settle in seventeen years and they expect the states to hash it out after federal budgeting has failed. This has a very negative impact on all people with any sort of federal insurance plans, which includes retirees and military as well. “As more doctors stop accepting Medicare and TRICARE patients, whether because of uncertainty about the cuts or the implementation of them, costs will rise because there will be fewer providers.” (Goodman, 2012, p. 1)

Our current economic situation is very fickle, as is our entire government system. This is a key point in time for determining the fate of our country and the direction in which it is headed. Legislation that gives the government control over our health care system is wrong in a myriad of different ways. Citizens will suffer with the encumbrance of higher taxes and deal with wage cuts due to the new reform. The citizens will also have to deal with cut hours to preserve the less than fifty employee cap and have to reduce their hours because small business cannot afford to pay them full-time and cover their insurance. The Affordable Care Act will not only negatively impact the citizens of our great country with the burden of higher taxes and more federally-sanctioned laws, but it will affect the states in which they reside. The states will be negatively impacted because this legislation will cause countless new fiscal burdens which include: coverage of able-bodied citizens who are not eligible for current benefits, an increase in payments not covered by the federal government in the “doc fix” issue, and they will have numerous administrative costs associated with the control and implementation of the new Act. Lastly, American business owners, the “backbone of America”, will have to deal with fines and new tax laws to stay within federal regulations. American business owners will have a hiring freeze because of economic uncertainty and will have to cut back current employee hours to stay within future regulations. All of these aspects are directly contributing to the demise of our system and beginning the end of the great era of the American nation; the era of personal responsibility, freedom and self-reliance is coming to an end with an entitlement-driven society. The key to maintaining this great country and our way of life is to downsize the government and its spending; this has been seen before shortly after the Cold War era. “Laws were enacted to enforce budget discipline, and the federal government sought ways in which to become more efficient and cost effective. It did this by adapting for its use successful business practices in the private sector, such as total quality management, business process reengineering, downsizing, rightsizing, mergers, streamlining acquisitions, and shedding excess infrastructure.”(Keat & Young, 2009, p. 532) We don’t need another reason for our country to claim bankruptcy; government spending must decrease and this legislation is a sure example of increased spending and government control.


Goodman, D. (2012). What is ’Doc Fix’ in the Medicare Debate and Why Does It Matter? policymic. Retrieved from

Haislmaier, E. F., & Blase, B. C. (2010, July 1). Obamacare: Impact on States. Backgrounder, 2433(), 1-19.

Keat, P. G., & Young, P. K. (2009). Government and industry: Challenges and pportunities for today’s manager. In E. Svendsen (Ed.), Managerial economics: Economic tools for today’s decision makers (sixth ed., pp. 520-541). Upper Saddle River, N.J.: Prentice Hall.

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