U.S. Taxpayers Pay for Two-Thirds of Healthcare

Who pays for health care in the United States?  Public perception lays the burden of health care spending on individuals and private entities, and estimates from the Center for Medicare and Medicaid Services (CMS) confirms those beliefs.  This understanding of the health care system has driven the political discourse on reform and lead to the development of policy solutions catering to private entities within the ACA.

A closer analysis of data on federal, state, and local government expenditures on health care show tax-funded expenditures in 2013 to be 64.3% of total public and private expenditures, more than 20 percentage points higher then previously published figures from CMS. In fact, tax-funded expenditures for health care totaled $1.877 trillion in 2013 or$5960 per person.

America continues to have the highest health related costs and pays a larger percentage of our gross domestic product towards health care than does any other nation.  To address these rising costs, policy makers and their constituents will need an accurate understanding of health care economics. Current trends show that  government expenditures, not private or individual spending,  is on the rise and will account for more then two-thirds of health care spending in America.  Public health care costs are expected to equal those of countries such as Canada, as a percentage of total health care costs, by 2024.

Future policy discussions must take into account growing public expenditures on health care.  Accurate data concerning public and private payments as well as health care usage and clinical trends should be used to guide further policy reform.  In contrast to many current political debates on health policy, discussions grounded in evidence and economics, not ideology, will be necessary for effective health care reform.

commentary by Orlando Sola

Abstract

Objectives. We estimated taxpayers’ current and projected share of US health expenditures, including government payments for public employees’ health benefits as well as tax subsidies to private health spending. 

Methods. We tabulated official Centers for Medicare and Medicaid Services figures on direct government spending for health programs and public employees’ health benefits for 2013, and projected figures through 2024. We calculated the value of tax subsidies for private spending from official federal budget documents and figures for state and local tax collections. 

Results. Tax-funded health expenditures totaled $1.877 trillion in 2013 and are projected to increase to $3.642 trillion in 2024. Government’s share of overall health spending was 64.3% of national health expenditures in 2013 and will rise to 67.1% in 2024. Government health expenditures in the United States account for a larger share of gross domestic product (11.2% in 2013) than do total health expenditures in any other nation. 

Conclusions. Contrary to public perceptions and official Centers for Medicare and Medicaid Services estimates, government funds most health care in the United States. Appreciation of government’s predominant role in health funding might encourage more appropriate and equitable targeting of health expenditures. 

Himmelstein, DU and Woolhandler, S. Am J Public Health. 2016; 106 (3): 449-52. PMID: 26794173