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Affordable Care Act will boost incomes of poorest people, study shows

BMJ 2014; 348 doi: https://doi.org/10.1136/bmj.g1236 (Published 30 January 2014) Cite this as: BMJ 2014;348:g1236
  1. Michael McCarthy
  1. 1Seattle

People in the bottom fifth of the income distribution in the United States will see their incomes rise by almost 6% by 2016 as a result of the Affordable Care Act, and those in the bottom 10th will see a rise of more than 7%, said a new study.1

Although changing the income distribution in the US was not a stated objective of the law, the 2010 health reform legislation may do more to change the income distribution in the US than “any other recently enacted law,” the researchers wrote.

The study was carried out by Henry Aaron and Gary Burtless, economists at the Brookings Institution, a non-partisan think tank based in Washington, DC. They included in their calculations the value of health insurance, which most US citizens receive as part of their employment package or through government health insurance plans, such as Medicaid and Medicare.

Most economic analyses focus on “money income,” such as wages, interest, dividends, social security payments, or other cash earnings—but they typically do not include as income health insurance contributions that employers make for their workers or government payments for people’s health coverage.

This employer and government spending adds up to $1.5 trillion (£906bn; €1.1 trillion) a year—equal to 13% of the country’s total personal income.

The researchers said that when such health benefits were included in income calculations “the gains in wellbeing at the bottom are hardly surprising,” since the goal of the law was to make health coverage more available by subsidizing insurance purchases for low and moderate income families or by providing coverage at no cost through Medicaid.

The gains experienced by lower income workers would be offset by small losses of around 0.3% to 1.1% among those with higher incomes, the researchers said. These losses would be caused by reduced employer contributions to health benefits and by increased Medicare taxes, higher taxes on unearned income (such as investment income), and smaller government subsidies for people enrolled in Medicare Advantage plans.

However, the study noted that most families would be unaffected by the changes. The researchers said, “Their insurance arrangements will not change, and they are not expected to pay higher taxes or premiums to finance reform or their own insurance.”

Notes

Cite this as: BMJ 2014;348:g1236

References

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