Public sector pays for more than half of U.S. health care

BETHESDA, Md. – A new study published online last week in the journal Health Affairs shows public dollars paid for 56.1 percent of all U.S. health care spending in 2002, an average of $2,612 per person – including $1,867 paid by Medicare, Medicaid and other programs and $745 from tax subsidies such as the exclusion of health insurance premiums from taxes.
Economists Thomas Selden and Merrile Sing of the Agency for Healthcare Research and Quality used the most recent data available with sufficient detail for their analysis, which was the first study since the 1970s that comprehensively analyzes the distribution of health care outlays and health care tax subsidies provided by federal, state and local governments.
They found that public dollars go predominantly to the sickest and oldest patients, not necessarily the poorest. Public funds covered 79.9 percent of spending for those in poor general health and 79.3 percent for those reported to be in poor mental health.
Public spending also reflects the rise in health care costs generally seen with age. The average person over 65 received $6,921 in public spending, more than five times as much as the average child ($1,225). Public dollars covered 66.5 percent of the tab for caring for the elderly, versus 56.5 percent for children under 18, despite coverage expansions for children through Medicaid and the State Children’s Health Insurance Program (SCHIP).
And though some programs, such as Medicaid, are means-tested, the two biggest public-spending categories, Medicare and tax subsidies, are not means-tested, the economists noted. As a result, public dollars covered 45.8 percent of total health care spending in 2002 for people in families with incomes greater than four times the federal poverty level.
Americans in high-income families received an average of $1,177 per person in tax subsidies – more than 10 times the $102 per person that poor people received through the tax system, the study found.
The study combined data from AHRQ’s Medical Expenditure Panel Survey with data from the National Health Expenditures Accounts compiled by the Centers for Medicare and Medicaid Services and economic modeling data from the National Bureau of Economic Research.
U.S. health care spending is projected to approach $2.4 trillion in 2008, the study notes.
The article can be found at http://content.healthaffairs.org/.