Obamacare Will Help Reduce Income Inequality

[ProSense]

...reposting

Obamacare Will Help Reduce Income Inequality

by TomP

Obamacare is far from perfect. Many of us have long sought a single payer system, but that was not doable in 2010. Perhaps a public option was, and it is unfortunate that we did not achieve that. It is one of the reforms to Obamacare that progressives should fight for.

My post today is about some good news. A study from the Brookings Institution shows that Obamacare will help reduce income inequality. Of course, much more is needed, but it all adds up. This is a step forward. (Raising the minimum wage also is very important because it will cause a bump in wages at minimum wage and wages above it (and it likely will have to be done state-by-state).)

Here's the study on Obamacare and inequality:

THE ARCHITECTS OF THE AFFORDABLE CARE ACT (ACA) sought to expand health insurance coverage, slow the growth of health care spending, and improve the quality of care. Changing the distribution of incomes was not a stated objective. Nonetheless, the ACA may do more to change the income distribution than any other recently enacted law. It does so by requiring employers to offer affordable health insurance to their full-time employees, by providing refundable tax credits to help make private health insurance affordable, and by expanding eligibility for Medicaid. The law penalizes nonpoor adults who are offered affordable coverage and do not buy it. It reduces subsidies for some Medicare plans and imposes new taxes on the labor and investment incomes of high-income families. In each of these ways, the new health law will change the net incomes of Americans at all income levels.

Brookings Institution: POTENTIAL EFFECTS OF THE AFFORDABLE CARE ACT ON INCOME INEQUALITY

You can read the entire study at that link. Here is a synopsis from TPM:

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.

Obamacare is worth defending.

http://www.dailykos.com/story/2014/01/27/1272820/-Obamacare-Will-Help-Reduce-Income-Inequality

Krugman: Obama and the One Percent
http://www.democraticunderground.com/10024391415

The new heatlh care law raised the payroll tax for high income earners and taxed investment income.

Net Investment Income Tax

A new Net Investment Income Tax goes into effect starting in 2013. The 3.8 percent Net Investment Income Tax applies to individuals, estates and trusts that have certain investment income above certain threshold amounts. The IRS and the Treasury Department have issued proposed regulations on the Net Investment Income Tax. Comments may be submitted electronically, by mail or hand delivered to the IRS. For additional information on the Net Investment Income Tax, see our questions and answers.

Additional Medicare Tax

A new Additional Medicare Tax goes into effect starting in 2013. The 0.9 percent Additional Medicare Tax applies to an individual’s wages, Railroad Retirement Tax Act compensation, and self-employment income that exceeds a threshold amount based on the individual’s filing status. The threshold amounts are $250,000 for married taxpayers who file jointly, $125,000 for married taxpayers who file separately, and $200,000 for all other taxpayers. An employer is responsible for withholding the Additional Medicare Tax from wages or compensation it pays to an employee in excess of $200,000 in a calendar year. The IRS and the Department of the Treasury have issued proposed regulations on the Additional Medicare Tax. Comments may be submitted electronically, by mail or hand delivered to the IRS. For additional information on the Additional Medicare Tax, see our questions and answers.

http://www.irs.gov/uac/Affordable-Care-Act-Tax-Provisions

[ProSense]

1. Kick!

[MrsKirkley]

2. Requiring employers provide "affordable health insurance" doesn't help low income working families

for a couple of reasons:

1. The 9.5% affordability test only counts the employee's portion of the premium, not the family premium. As long as the employer offers family health insurance, the entire family, whose incomes aren't counted in the affordability test, are ineligible for subsidies regardless of income.

2. Unlike the exchange, costs (deductibles, annual maximums, etc) associated with employer provided health insurance are NOT based on income. In fact, many low income workers have higher deductibles and annual maximums than high paid workers.

I think the ACA has the potential of reducing income inequality even more after a few changes are made. Since costs associated with employer provided health insurance are not based on income, eligibility for subsidized health insurance on the exchange needs to be based on income alone, not access to employer provided coverage. Otherwise, too many families making just above the Medicaid threshold end up paying for health insurance they can't afford to use.

[ProSense]

3. The

"Requiring employers provide "affordable health insurance" doesn't help low income working families...Otherwise, too many families making just above the Medicaid threshold end up paying for health insurance they can't afford to use."

...subsidies do help, and the thresholds will increase in the fall.

WASHINGTON, D.C. — The federal government has released slightly higher poverty level guidelines for 2014, but those won’t alter the income thresholds that are being used now to determine what kind of financial assistance is available to buy insurance under the health law.

The guidelines will be relevant in the fall, when people look to buy coverage for 2015. Under the new guidelines, Medicaid coverage will be available to individuals earning up to $16,105 and families earning up to $32,913 in states that have decided to expand Medicaid under the provisions of the federal health law. Premium subsidies in the new online marketplaces will be available to individuals earning up to $46,680 and families of four earning up to $95,400.

The government said the increase in the federal poverty level was due to a 1.5 percent price increase between 2012 and 2013. Further adjustments were made to standardize the differences between family sizes.

- more -

http://www.khi.org/news/2014/jan/27/feds-release-poverty-guidelines-2014/

Federal Poverty Level (FPL)
https://www.healthcare.gov/glossary/federal-poverty-level-FPL/

"I think the ACA has the potential of reducing income inequality even more after a few changes are made. Since costs associated with employer provided health insurance are not based on income, eligibility for subsidized health insurance on the exchange needs to be based on income alone, not access to employer provided coverage. Otherwise, too many families making just above the Medicaid threshold end up paying for health insurance they can't afford to use.'

I agree, but at the lower income levels, access is likely going to be more than the employee can afford to pay, which makes them eligible for the exchange.

[MrsKirkley]

4. Not as long as the 9.5% Affordability test only counts the employee's portion of the premium.

Thanks for the info on 2015 Medicaid rate increases.

[ProSense]

5. I took that into account. n/t

[ProSense]

6. Kick for

kill the bill.