By Joyce Frieden
MedPage Today, Jan. 21, 2016
Taxpayers funded nearly two-thirds of all U.S. health expenditures in 2013, and that figure is expected to rise even higher by 2024, a study has found.
The percentage of federal, state, and local taxpayer funding of healthcare expenditures rose from 59.8% in 1999 to 64.3% in 2013, and is projected to increase to 67.1% by 2024, according to David Himmelstein, MD, and Steffie Woolhandler, MD, MPH, both of City University of New York School of Public Health at Hunter College in New York City. The study appeared online in the American Journal of Public Health.
“The big thing that went up was Medicare [spending], and that went up about 2.5 [percentage] points,” Woolhandler told MedPage Today in a phone interview. “The rest pretty much stayed the same. We expected over the next decade that Medicaid was going to be the piece that goes up, but in fact the thing going up was the Medicare program.”
To estimate their numbers, the researchers added up three types of expenditures:
* Direct government payments for Medicare, Medicaid, and other public programs such as the Veterans Health Administration, the NIH, and public health departments
* Government agencies’ expenditures for public employees’ health insurance coverage
* Federal, state, and local tax subsidies to healthcare
They found that tax-funded health expenditures totaled $1.877 trillion in 2013 — out of total expenditures of $2.919 trillion. Taxpayer-funded expenditures are projected to increase to $3.642 trillion in 2024.
Medicare accounted for 20.1% of all healthcare expenses in 2013, and is expected to rise to 22.5% in 2024. Medicaid, for its part, rose from 15.9% of overall expenditures in 2013 to 17.3% in 2015, and is expected to stay at about that level, the investigators noted.
Another large category, tax subsidies to private health spending, accounted for $294.9 billion in 2013 — or 10.1% of total health expenditures — and are expected to remain at about 10% through 2024, they wrote. “Federal income and payroll tax subsidies account for more than 80% of these tax expenditures, with state and local income tax subsidies accounting for the rest.”
When it comes to employer payments for private health insurance, government employers now account for 28%, and that number is expected to rise to 31% in 2024. “Most of these expenditures (more than four-fifths) are made by state and local governments,” the authors wrote.
Himmelstein and Woolhandler noted several limitations to their study. First, the projections could end up being inaccurate due to economic fluctuations or unanticipated changes in healthcare policy or tax policy. In addition, the analysis may slightly understate public spending since they did not include tax subsidies for nonprofit hospitals, which were estimated at $24.6 billion in 2011, or about 1% of health spending.
Overall, the trend toward an increasing percentage of total healthcare spending coming from federal, state, or local government coffers “seems likely to continue,” they wrote. “The expected uptick in government’s share is attributable both to the effects of the [Affordable Care Act] and to population aging, which will push Medicare enrollment up by 37% between 2013 and 2024.”
The Canadian government funds about 71% of healthcare spending in that country, which has a pretty comprehensive single-payer system, noted Woolhandler, who, along with Himmelstein, has long advocated for single-payer health insurance for the U.S. “We’re really paying for the price of national health insurance and just not getting it,” she said in the interview. “We’re spending this tax money wastefully.”
About 31% of each U.S. healthcare dollar is spent on administrative costs, compared with 16.5% in Canada, Woolhandler said. “We also pay for wasteful facilities, excessive facilities, and high-tech care where it’s not needed, and finally we pay much, much higher drug prices. Every other nation gets lower prices than the U.S., and certainly [a] single-payer [system] gives huge market leverage to get better prices.”
Himmelstein and Woolhandler disclosed serving as co-founders of Physicians for a National Health Program. The authors disclosed no relevant relationships with industry.
Joyce Frieden is news editor at MedPage Today.