ECONOMIC REPORT OF THE PRESIDENT

Percent
25
20
Creation of
Medicare and
Medicaid
Figure 4-1
Uninsured Rate, 1963–2016
ACA First Open
Enrollment
15
10
2016
5
0
1960 1965 1970 1975 1980 1985 1990 1995 2000 2005 2010 2015
Note: Estimate for 2016 reflects only the first two quarters. Other estimates are full-year.
Source: National Health Interview Survey and supplemental sources described in CEA (2014).
family coverage (KFF/HRET 2016). These amounts would have been a
major expense for most families, but they represented a particularly heavy
burden for low- and moderate-income families already struggling to meet
other basic needs. As illustrated in Figure 4-2, for a family of four with an
income below 200 percent of the Federal Poverty Level, the average premium
for an employer-sponsored family policy would have consumed 30
percent or more of family income. For a family below the poverty line, it
would have consumed 60 percent or more of family income, an essentially
insurmountable barrier.2
Public policy played an important role in helping families meet these
affordability challenges, but the adequacy of these efforts varied widely by
age. For people age 65 and older, Medicare had succeeded in achieving
nearly universal coverage at all income levels, as illustrated in Panel C of
Figure 4-3. But individuals under age 65 were served by a patchwork of
programs and incentives that left significant gaps.
For people with access to coverage through an employer, the tax
code provided a large implicit subsidy for purchasing coverage. Unlike cash
compensation, the compensation employers provide in the form of health
2 Families bore these burdens whether they purchased coverage directly or, as was typically the
case, obtained it through an employer. While employers typically pay around three-quarters
of the total premium, economic theory and evidence indicate that employees ultimately bear
the cost of that subsidy in the form of lower wages and salaries (for example, Summers 1989;
Baicker and Chandra 2006).
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