Federal Government Funds Two-Thirds of Healthcare Costs, Study Finds

Tax-funded expenditures accounted for 64.3% of US healthcare spending in 2013, according to a new study published online in American Journal of Public Health.

Researchers tabulated official data from CMS, the Office of Management and Budget, the US Census Bureau, and the Internal Revenue Service on direct government spending for health programs and public employees’ health benefits for 2013 and projected figures through 2024. They calculated the value of tax subsidies for private spending from official federal budget documents and figures for state and local tax collections.

“Contrary to public perceptions and official Centers for Medicare and Medicaid Services [CMS] estimates, government funds most health care in the United States,” concluded the study’s authors, David U. Himmelstein, MD, and Steffie Woolhandler, MD, MPH, of the City University of New York School of Public Health at Hunger College. Drs Himmelstein and Woolhandler are cofounders and leaders of Physicians for a National Health Program (PNHP), a nonprofit organization that advocates for a single-payer health system. (However, PNHP had no role in funding the study.)

Tax-funded health expenditures totaled $1.877 trillion in 2013 and are projected to increase to $3.642 trillion in 2024. The US government’s share of overall health spending was 64.3% of national health expenditure in 2013 and will rise to 67.1% in 2024 because of the Affordable Care Act (ACA).

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, the study’s authors said. At $5960 per capita, US government spending on healthcare costs was the highest of any nation, including countries with universal health programs such as Canada, Sweden, and the United Kingdom.

Drs Himmelstein and Woolhandler’s data show Americans pay the world’s highest health-related taxes, they said, which conflicts with popular perceptions that the US healthcare financing system is predominantly private.

“Americans pay the highest healthcare taxes in the world, but patients are still left with unaffordable premiums and deductibles,” said Dr Woolhandler, while millions are spent on paperwork and taxpayers make it possible for the private insurers and pharmaceutical companies to make huge profits.

The study shows that universal coverage is affordable without a big tax increase, said Dr Himmelstein.

“We already pay for national health insurance, but we don’t get it,” he said.

This conclusion closely follows those of presidential candidate Bernie Sanders, who has stated that the success of the ACA is a stepping stone to moving forward to achieve the goal of universal healthcare via a single-payer plan that extends Medicare to all.

The Sanders single-player plan would cover preventive, emergency, inpatient and outpatient care, specialty care, and primary care, along with vision, dental, mental health care, prescription drugs, and diagnostics with no deductibles and copayments. The plan would be paid for with a 2.2% healthcare premium, a 6.2% healthcare payroll tax for employers, an estate tax on the wealthiest Americans, and changes in the tax code to make federal income taxes more progressive.

Sanders’ plan is projected to save $6 trillion over the next 10 years compared with the current system, according to Gerald Friedman, a healthcare economist at the University of Massachusetts at Amherst. Sanders’s plan would save consumers money by eliminating private health insurance. The typical family earning $50,000/year would save nearly $6000/year in healthcare costs under the Sanders plan; businesses would save more than $9500/year under the Sanders plan. People making $250,000 to $500,000 per year would be taxed at a rate of 37%. The top rate (52%) would be paid by those earning $10 million or more a year.