It is only partially true to say that the United States does not currently
have a national health care system. The Centers for Medicare & Medicaid
Services (CMS) estimated the 1999 government share of total US health spending
as 45.2% ($548 billion).1 This estimate
includes funding for Medicare, Medicaid, workers' compensation, the Department
of Veterans Affairs, public hospitals, and government public health activities.
Thus, public funds directly pay for the health care of many people in the
Beyond these payments made directly to providers or institutions by
the government, there are also other public funds spent on health care that
are not included in the CMS estimate. These funds include the premiums paid
to private insurance companies to cover government employee benefits, as well
as government income that is lost to tax subsidies for health insurance premiums.
Such subsidies are tax-exempt when provided by an employer, but nonexempt
if paid for directly by an individual.2 Furthermore,
this tax subsidy is unequally distributed, averaging $2357 for families with
annual incomes above $100 000 but only $71 for families with annual incomes
below $15 000.2 Thus, for example,
the CMS classifies benefits for veterans as government health expenditures,
since the government directly funds Veterans Affairs hospitals for their services,
while health services for government employees paid for by a private insurer
(but funded by the government through premiums) are not listed as public expenditures.
Sheils and Hogan consider tax-exempt health benefits to be a seriously
underreported cost to the government ($111 billion in 1998).2 Woolhandler
and Himmelstein recently recalculated the government share of health expenditure
by including these tax subsidies and public employee private health benefits,3 and concluded that the government-financed share
of total health spending in 1999 was 59.8%, equal to $723.8 billion or $2604
per capita. This figure is 25% higher than the CMS estimates for the same
year. A 2000 study by Fox and Fronstin also concluded that the government
share of expenditures on health care in 1998 was about 60%.4
These data indicate that, in addition to spending more and more on health
care in absolute terms, the US government has also paid for a progressively
larger share of national health expenditures during the last 35 years. Between
1965 and 1999, the government share of tax-financed health expenditures rose
more than 5700%, while overall health costs increased 2900%.3 In
1965, US government tax-financed health expenditures per capita were less
than most other industrialized nations. By 1999, the per capita government
proportion of health expenditures in the United States exceeded total health
spending per capita in every industrialized nation except Switzerland.3 Additionally, tax subsidies and public employee
benefits, which, again, are usually excluded from the calculation of public
health care spending, rose as a proportion of overall government-financed
health expenditures between 1965 and 1999, even in the face of large increases
in direct federal spending on other programs such as Medicare and Medicaid.3
Overall, then, the US government is paying for the majority of US health
expenditures while a large segment of the population remains uninsured or
underinsured. Many of these funds go directly to private insurers who cover
government employees. Many go to tax breaks that benefit both employers who
purchase private insurance and, disproportionately, the wealthiest, best-insured
families in the United States.
Another significant component of government (and non-government) expenditure
goes to redundant and often unnecessary overhead costs. In part because many
of the government funds spent on health care go through an extensive, multipayer
private system (at least 755 insurance plans exist in Seattle alone), bureaucracy
and administration now consume 20% to 30% of the total US health care budget.7
While part of this spending is necessary for medical system management,
the wide variety of insurance plans and payer options inflicts huge amounts
of extra paperwork and billing burdens on providers and institutions. The
average US hospital spends 25% of its budget on billing and administration
without evidence that this improves patient care.5 In
fact, there is evidence that health plans with higher administrative costs
deliver worse quality care.6 By contrast,
Canada's single-payer system has 1% administrative overhead costs, and even
its Medicare program only consumes 4% of this total budget.7 Reducing
spending on redundant bureaucracy and complicated insurance billing to Canadian
levels could save as much as $140 billion annually7 without
reducing the funds spent on care.
Some tools below are only available to our subscribers or users with an online account.
Download citation file:
Web of Science® Times Cited: 4
Customize your page view by dragging & repositioning the boxes below.
Enter your username and email address. We'll send you a link to reset your password.
Enter your username and email address. We'll send instructions on how to reset your password to the email address we have on record.
Athens and Shibboleth are access management services that provide single sign-on to protected resources. They replace the multiple user names and passwords necessary to access subscription-based content with a single user name and password that can be entered once per session. It operates independently of a user's location or IP address. If your institution uses Athens or Shibboleth authentication, please contact your site administrator to receive your user name and password.