MEASURING THE IMPACT OF VALUING HEALTH INSURANCE ON LEVELS AND TRENDS IN INEQUALITY AND HOW THE AFFORDABLE CARE ACT OF 2010 COULD AFFECT THEM

Authors

  • RICHARD V. BURKHAUSER,

    1. Burkhauser: Professor, Department of Policy Analysis and Management, Cornell University, Ithaca, NY 14853; Melbourne Institute of Applied Economic and Social Research, University of Melbourne, Victoria, Australia. Phone 607-255-2097, Fax 607-255-4071, E-mail rbv1@cornell.edu
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  • JEFF LARRIMORE,

    1. Larrimore: Economist, Joint Committee on Taxation, United States Congress, SW, Washington, DC 20515. Phone 202-226-7575, Fax 202-225-0833, E-mail jeff.larrimore@mail.house.gov
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  • KOSALI SIMON

    1. Simon: Professor, The School of Public and Environmental Affairs (SPEA), Indiana University, Bloomington, IN 47405-1701. Phone 812-856-3850, E-mail simonkos@indiana.edu
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    • This paper was funded in part by the Pew Charitable Trust–Economic Mobility Project. Any opinions expressed in this paper are solely the authors' and should not necessarily be attributed to the Pew Charitable Trust. We thank Scott Winship for valuable advice at all stages of the project.


Abstract

A substantial part of the U.S. inequality literature focuses on yearly levels and trends in pre-tax, post-transfer cash income and its distribution over time and finds that median income appears to be stagnating, with income growth primarily coming at higher income levels. When we use data from the Current Population Survey for 1995–2008 and add the value of employer- and government-provided health insurance coverage, not only does it increase the upward trend in the level of resources controlled by Americans, but also reduces the level of inequality in these resources and its upward trend. We then provide a highly stylized example of this broader income measure's value in capturing the impact of two key provisions of the Affordable Care Act of 2010—an expansion in Medicaid and the provision of subsidies to lower-income families for purchasing private coverage on state-run exchanges. Even though these incremental expansions build on existing systems of government-provided health insurance, we find that the vast majority of the benefits would still accrue to the bottom three deciles of the income distribution when we include the value of employer- and government-provided health insurance in our expanded yearly income measure. (JEL D31, H51, I14)

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