Government Spending on Health Care Equals What Other Nations Pay for Universal Care
Study contradicts official estimates and popular perception that the private sector pays the biggest tab.
Contrary to official estimates, the government funds most health care in the United States, according to a new study published Thursday in the American Journal of Public Health. In fact, through their taxes Americans pay the equivalent of what those in other nations pay for universal health care—they just don’t receive it, said Dr. David Himmelstein, who co-authored the study with Dr. Steffie Woolhandler.
The peer-reviewed findings are based on data from the Centers for Medicare and Medicaid Services, the Office of Management and Budget and state and local tax records. Himmelstein and Woolhandler are professors at the City University of New York and lecturers at Harvard Medical School.
They found the government’s share of overall health spending—federal, state and local—was 64.3 percent of national health expenditures in 2013. By comparison, CMS estimated that government spending at the federal, state and local level accounted for just 43 percent of health expenditures in 2013.
What sets the new study apart from previous estimates is the inclusion of costs associated with providing health care to government employees and lawmakers as well as the value of health care-related tax breaks, which OMB defines as “tax expenditures” in documents.
“When government pays for veterans’ care, CMS classifies it as a public expenditure because government writes the checks that fund the Veterans Health Administration. But CMS classifies government-paid health benefits for senators or [federal employees] as ‘private’ expenditures because a private insurer pays the claims,” according to the paper, “The Current and Projected Taxpayer Shares of U.S. Health Costs.” Such accounting fails to capture significant indirect government spending on health care, the authors maintain.
“Government health expenditures in the United States account for a larger share of gross domestic product (11.2 percent in 2013) than do total health expenditures in any other nation,” including those that provide universal health coverage to all citizens, the authors wrote. Moreover, the authors predict that increased needs of the aging population and requirements in the Affordable Care Act will drive up the government’s spending share to 67.1 percent in 2024.
Himmelstein told Government Executive that inefficiencies in the American health care system eat up a disproportionate share of costs as compared to other nations. An earlier study by Himmelstein and Woolhandler and seven other authors in the journal Health Affairs compared U.S. hospital spending to that in seven other nations with a variety of health care systems. The United States was a cost outlier, with hospital administrative costs topping 25 percent.
Another study the authors participated in showed that a simplified financing system in U.S. health care could save more than $350 billion annually—nearly 15 percent of total health care spending.