Economic Scene - In Health Bill, Obama Attacks Wealth Inequality - NYTimes.com

Economic Scene - In Health Bill, Obama Attacks Wealth Inequality - NYTimes.com

By DAVID LEONHARDT | Published: March 23, 2010

For all the political and economic uncertainties about health reform, at least one thing seems clear: The bill that President Obama signed on Tuesday is the federal government’s biggest attack on economic inequality since inequality began rising more than three decades ago.

Over most of that period, government policy and market forces have been moving in the same direction, both increasing inequality. The pretax incomes of the wealthy have soared since the late 1970s, while their tax rates have fallen more than rates for the middle class and poor.

...

The bill is the most sweeping piece of federal legislation since Medicare was passed in 1965. It aims to smooth out one of the roughest edges in American society — the inability of many people to afford medical care after they lose a job or get sick. And it would do so in large measure by taxing the rich.

A big chunk of the money to pay for the bill comes from lifting payroll taxes on households making more than $250,000. On average, the annual tax bill for households making more than $1 million a year will rise by $46,000 in 2013, according to the Tax Policy Center, a Washington research group. Another major piece of financing would cut Medicare subsidies for private insurers, ultimately affecting their executives and shareholders.

The benefits, meanwhile, flow mostly to households making less than four times the poverty level — $88,200 for a family of four people. Those without insurance in this group will become eligible to receive subsidies or to joinMedicaid. (Many of the poor are already covered by Medicaid.) Insurance costs are also likely to drop for higher-income workers at small companies.

Finally, the bill will also reduce a different kind of inequality. In the broadest sense, insurance is meant to spread the costs of an individual’s misfortune — illness, death, fire, flood — across society. Since the late 1970s, though, the share of Americans with health insurance has shrunk. As a result, the gap between the economic well-being of the sick and the healthy has been growing, at virtually every level of the income distribution.

The health reform bill will reverse that trend. By 2019, 95 percent of people are projected to be covered, up from 85 percent today (and about 90 percent in the late 1970s). Even affluent families ineligible for subsidies will benefit if they lose their insurance, by being able to buy a plan that can no longer charge more for pre-existing conditions. In effect, healthy families will be picking up most of the bill — and their insurance will be somewhat more expensive than it otherwise would have been. ...