Does the ACA redistribute income?

Got an email from a Fact Check type site asking:

I’m writing a fact check on a statement from James Capretta that Obamacare is a “massive income redistribution” that has “basically taken $250 billion a year out of taxes and Medicare and (moved) it into the Medicaid expansion and the subsidy structure.”

My reply:

I am unsure of the total dollar amount per year; that depends upon how many people sign up for exchange plans, and how many states ultimately expand Medicaid. However, of course the ACA redistributes income. There is no government activity that does not redistribute income. If there was one, it would entail levying a tax and returning it in identical shares to the taxpayers who paid it. Medicare, food stamps, Military–all government spending is redistributive in nature, meaning it produces a distributive outcome that markets alone would not produce.

The ACA didn’t have to increase taxes or cut Medicare payments to Medicare Advantage plans and hospitals to finance the ACA. They could have financed the ACA in the way that Republicans financed Medicare Part D in 2003—via deficit financing. That essentially redistributed income to those benefiting now, and shifted the costs to future generations. That is a much politically easier way to pay for new spending.

All government spending is redistributive in nature. The key question is typically the political clout of the group(s) benefiting.

About Don Taylor
Professor of Public Policy at Duke University (with appointments in Business, Nursing, Community and Family Medicine, and the Duke Clinical Research Institute). I am one of the founding faculty of the Margolis Center for Health Policy, and currently serve as Chair of Duke's University Priorities Committee (UPC). My research focuses on improving care for persons who are dying, and I am co-PI of a CMMI award in Community Based Palliative Care. I teach both undergrads and grad students at Duke. On twitter @donaldhtaylorjr

One Response to Does the ACA redistribute income?

  1. Pingback: Taxes and Tradeoffs | freeforall

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