Obamacare is a "massive, massive income redistribution" with "$250 billion a year in Medicaid expansion (and) in the subsidy structure that's basically being paid for by people on Medicare, through Medicare cuts, and a lot of tax increases." — James Capretta, of the Ethics and Public Policy Center, on Dec. 1 in a broadcast of "Fox News Sunday"
Conservatives have many reasons to dislike the national health care law, but one of the most fundamental is, as with any government program, it interferes with private-sector decisions by collecting money from some people and spending it in ways that might not benefit them directly. This point came up on “Fox News Sunday” when host Chris Wallace asked if Obamacare involved massive income redistribution.
One of his guests, James Capretta with the Ethics and Public Policy Center, a group with ties to conservative organizations, agreed wholeheartedly.
“If you think about it, it’s $250 billion a year in Medicaid expansion, in the subsidy structure, that’s basically being paid for by people on Medicare, through Medicare cuts, and a lot of tax increases,” Capretta said. “It is a massive, massive income redistribution.”
In this fact check, we look at whether the new health care law is a “massive, massive income redistribution” that has taken $250 billion a year out of taxes and from people on Medicare and moved it into Medicaid expansion health care subsidies.
Capretta told us that he drew his numbers from the Congressional Budget Office, the nonpartisan analytic arm of Congress. In a May 2013 report, that office projected that in 2023, the Affordable Care Act would spend $250 billion specifically to offer Medicaid to a larger number of poor people and subsidies to make private insurance more affordable to people making up to 400 percent of the federal poverty level (about $92,000 a year for a family of four).
Capretta argued that since the law reduces deficits, that $250 billion, and more, must come from somewhere, and he correctly points to reductions in Medicare spending, and a variety of tax increases.
The Obamacare balance sheet
The most detailed CBO figures are for 2022, not 2023, but the pattern remains the same.
A quick reminder: The Medicare spending reductions we’re talking about are in the future growth of Medicare spending, not a cut in existing programs.
That said, on the government balance sheets, in 2022 the health care law “saves” $133 billion from Medicare, Medicare Advantage (an alternative insurance program within Medicare), and a program that pays hospitals that serve more than their fair share of poor, uninsured patients. Another $161 billion in new revenue is collected from five different sources.
That list includes penalties paid by individuals and employers for not buying or offering insurance, taxes on higher-income earners, a tax on the most generous insurance plans, a tax on medical device and drug manufacturers, and a grab bag of other taxes.
That’s a total of $294 billion.
What does the government do with the money? As Capretta said, it spends most of it on an expansion of Medicaid and on subsidies for people purchasing health insurance through state and federal marketplaces. Around $45 billion goes toward deficit reduction.
Does that make Capretta right? John Holahan, a fellow at the Urban Institute, an academic research center in Washington, said yes and no.
“There’s definitely redistribution going on,” Holahan said. “All the Medicaid and subsidies clearly go to lower-income people. Where he’s wrong is in calling it massive. It’s very small.”
Holahan said relative to the size of the economy, which the CBO estimates at $21.7 trillion in 2022, the total redistribution amounts to about 1 percent.
And to one of Capretta’s main points, it’s unclear whether the Medicare savings come from people on Medicare.
Tracking the redistribution
When Capretta said that the Affordable Care Act changes are “being paid for by people on Medicare, through Medicare cuts,” he simplified a complex situation. The single largest source of dollars to cover the cost of expanded coverage comes from paying hospitals and doctors less for the same work. Jeffrey Clemens, a health economist at the University of California-San Diego, said this will hit the incomes of providers.
“When it becomes less profitable for providers to treat Medicare beneficiaries, they become less interested in seeing Medicare beneficiaries,” Clemens said.
If a hospital pulled out of Medicare, that would hurt its Medicare patients. But Ann Marie Marciarille, a specialist in health policy at the University of Missouri School of Law, said providers have a track record of staying with the program.
There is one group of Medicare beneficiaries that is likely to be hurt: people who purchase Medicare Advantage policies. This program has grown through subsidies that the Affordable Care Act phases out.
A look at Obamacare taxes
Capretta also mentioned tax hikes. The ones that most clearly redistribute money are the ones on wealthier Americans. In 2022, they can expect to pay $46 billion more. But then you have tax hikes that hit various players in the health care industry, plus the penalties on individuals and employers.
Our ruling
We rate Capretta’s claim Half True.
