Question

Discuss health care in the United States in terms of income redistribution

Answer 1

The redistribution is explained in terms of effects from Obamacare.

The growing gap between rich and poor is a defining feature of 21st-century America. From 2009 to 2012 income for the top 1% rose by 31.4%, whereas the bottom 99% saw income rise by just 0.4%. However, this tally of income excludes taxes and transfers from the government, such as Social Security and health subsidies from Medicare, the health programme for the old, and Medicaid, the health programme for the poor. Americans received a whopping $1.5 trillion in net health-care subsidies in 2012, in the form of government programmes and employers' contributions to health insurance. That $1.5 trillion was equal to 13% of Americans' disposable income—that is, income minus taxes.

Obamacare included new taxes and dramatic changes in the subsidies for health care. These measures were expected to have an impact on income, broadly defined. For example, the law required employers to offer health insurance, which may spur them to lower cash wages. The law also expanded Medicaid to a broader swath of the poor; those earning between 100% and 400% of the federal poverty line were eligible for tax credits to buy insurance on new health exchanges. On top of this, Obamacare taxed adults who can afford but don't buy coverage; it reduces payments to private Medicare plans; and it raised Medicare taxes for rich families.

It is predicted that the law's impact on cash wages will be relatively modest. Workers whose employers begin to offer insurance may see their cash wages dip, while workers who lose employer-sponsored insurance may see their wages rise. But when a broader definition of income is used, including the value of health subsidies and taxes, Obamacare has a bigger impact. Americans in the bottom 10% of income distribution will see an average jump of 7.2%; those in the second decile will see their income jump by 5.3%. For the top 80% of Americans, income will drop. The biggest percentage declines come from the middle class, rather than the very rich.

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