“It has gotten so bad that nearly 20 million Americans have chosen to pay the penalty or received an exemption rather than buy insurance. That’s something that nobody has ever heard of or thought could happen, and they’re actually doing that rather than being forced to buy insurance.”
— President Trump, remarks in a meeting with health insurance executives, Feb. 27, 2017
This number struck us as a bit curious when President Trump launched into one of his standard attacks on the Affordable Care Act, a.k.a. Obamacare, as he met with representatives of the health-insurance industry.* Are 20 million Americans actually refusing to buy health insurance and instead pay a penalty?
Let’s dig into the math.
Trump often speaks without much nuance, but notice that he slipped in the qualifier “or received an exemption.” It’s the kind of sly maneuver former president Barack Obama would do when he wanted to use a fishy number. (See this example when Obama earned Three Pinocchios for talking like a used-car salesman.)
According to a Jan. 9, 2017, letter from IRS Commissioner John Koskinen to Congress, only 6.5 million taxpayers paid the so-called “shared responsibility” payments in 2015. That’s actually a decrease from 2014, when 8 million taxpayers made a payment. The payments in 2015 totaled about $3 billion, with the average payment about $470.
It’s worth noting that many people likely only paid a penalty for some months, not an entire year. The Congressional Budget Office estimates that on average, about 3 million people will pay the penalty for being uninsured in any given month in 2016.
So how does Trump get up to 20 million? He’s adding in people who received an exemption; that totaled 12.7 million taxpayers. That only adds up to 19.2 million, but Trump did say “nearly 20 million.”
Exemptions are granted for a number of reasons, but the most common one is that an individual has income below a certain threshold and lives in a state that did not expand the eligibility for Medicaid. (The law offered Medicaid to nearly all low-income individuals with incomes at or below 138 percent of poverty, or $27,821 for a family of three in 2016). The second most common exemption is if a citizen lives outside of the United States. People also do not need to pay a penalty if they would have had to pay more than 8.13 percent of their income (in 2016) to obtain health insurance.
This is where Trump’s rhetoric gets misleading. “That’s something that nobody has ever heard of or thought could happen, and they’re actually doing that rather than being forced to buy insurance,” he told the governors.
But comparing the exemptions expected under the original 2010 Congressional Budget Office estimate for the law and today is apples and oranges because the Supreme Court made the Medicaid expansion optional for states. As of September 2016, 19 states had not expanded their programs; the Kaiser Family Foundation estimates more than 2.5 million adults fall into the “coverage gap,” especially in states like Texas, Florida, Georgia and North Carolina.
Indeed, the $3 billion raised from the penalties in 2015 is the same as CBO’s 2016 estimate for 2016, 2017, 2018, 2019 and 2020. In other words, little or no growth is expected. In fact, the CBO has progressively decreased its estimates of the penalty payments that would be collected. The 10-year estimate in May 2013 was $52 billion; that dropped to $38 billion in March 2016. That indicates that fewer people than expected are paying penalties.
The White House did not respond to a request for comment.
The Pinocchio Test
Normally, this kind of slippery language would be worth Two Pinocchios. The 20 million figure does include people paying a penalty and people claiming an exemption. While Trump slipped in “received an exemption,” he strongly suggests the figure is really about people paying a penalty — “they’re actually doing that rather than being forced to buy insurance” — and so the number lacked significant context.
But Trump tips this number into Three Pinocchio territory when he further claims that is “something that nobody has ever heard of or thought could happen.” Actually, the number of people paying the penalty is declining, not increasing, while the number of exemptions grew because states led by Republicans refused to accept funds to expand Medicaid for their citizens. So the number really does not show what Trump claims it does.
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[*Note: an earlier version of this column incorrectly said the president made these remarks to the National Governors Association.]