Obamacare Will Reduce Income Inequality And Help Poorest: Study


Obamacare is poised to mitigate soaring inequality by raising the incomes of the poorest Americans, according to a new study by the Brookings Institution.

By 2016, when its core provisions will have fully taken effect, the law will lift the average incomes of the bottom one-fifth of earners by nearly 6 percent, and the incomes of the bottom one-tenth by more than 7 percent, the study found.

The “great majority” of beneficiaries of the law’s subsidies and Medicaid expansion will be in the bottom half — and the “overwhelmingly majority” in the bottom third — of the income distribution.

The findings aren’t surprising but serve as a reminder that the health care law advances one of the Obama administration’s highest priorities: to address the growing wealth gap. The law finances trillions of dollars in new long-term health care spending for poorer Americans with a mix of taxes and fees on upper incomes as well as cuts to federal subsidies for health insurers and providers.

The Brookings study found that the benefits of the law would have been greater for lower incomes if the Supreme Court hadn’t made the Medicaid expansion optional for states. About half of them have refused the federal funds to cover low-income adults and families up to 133 percent of the poverty line. “An additional 6% of Americans in the lowest money income quintile would have obtained health coverage if the enacted version of the ACA had gone into effect,” Brookings concluded in its executive summary.

The study projected that net enrollment in employer-provided insurance plans will shrink by 5.9 million, due to new employer mandates and the available of health insurance elsewhere. This shift, the study said, is likely to increase money wages (which does not count health insurance benefits as income) in the bottom one-fifth of the income distribution while reducing it elsewhere.

“On net and under the broadest income measure,” Brookings concluded, “the gains and losses cause small proportional drops in income for Americans in the top three-quarters of the income distribution which offset the larger proportional gains obtained by Americans in the bottom quarter of the distribution.”

ACA and Income Inequality – Brookings Study