The Current and Projected Taxpayer Shares of US Health Costs

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http://ajph.aphapublications.org/doi/full/10.2105/AJPH.2015.302997

The Current and Projected Taxpayer Shares of US Health Costs

Excerpt:
Objectives. We estimated taxpayers’ current and projected share of US health expenditures, including government payments for public employees’ health benefits as well as tax subsidies to private health spending.

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Methods. We tabulated official Centers for Medicare and Medicaid Services figures on direct government spending for health programs and public employees’ health benefits for 2013, and projected figures through 2024. We calculated the value of tax subsidies for private spending from official federal budget documents and figures for state and local tax collections.

Results. Tax-funded health expenditures totaled $1.877 trillion in 2013 and are projected to increase to $3.642 trillion in 2024. Government’s share of overall health spending was 64.3% of national health expenditures in 2013 and will rise to 67.1% in 2024. 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.

Conclusions. Contrary to public perceptions and official Centers for Medicare and Medicaid Services estimates, government funds most health care in the United States. Appreciation of government’s predominant role in health funding might encourage more appropriate and equitable targeting of health expenditures.

The United States has the world’s highest per capita health care costs—about double those of other wealthy nations.1 According to both official figures and public perception, most health care funding in the United States comes from private payers. For instance, the Centers for Medicare and Medicaid Services (CMS) estimates that federal, state, and local governments accounted for 43% of health expenditures in 2013.2

These official figures reflect an accounting framework based on who wrote the final check as money flowed from households or employers to health care providers, and exclude many indirect government health expenditures. Thus, 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 Bureau of Investigation agents as “private” expenditures because a private insurer pays the claims. Moreover, the tax subsidies that fund a significant share of private health expenditures (e.g., private-employer spending) are not counted by CMS as government health spending, although the Office of Management and Budget (OMB) tabulates these subsidies as “tax expenditures” in official budget documents.3

In a previous study, we estimated that the public share of US health spending—after inclusion of these tax subsidies and government payments for public employees’ health benefits—amounted to 59.8% of the total in 1999, nearly double the 1965 figure.4 The current study provides detailed estimates of direct and indirect government health spending in 2013, as well as projected figures through 2024.

METHODS Section:
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We estimated total taxpayer expenditures for health care by summing 3 types of expenditures: (1) direct government payments for Medicare, Medicaid, and other public programs such as the Veterans Health Administration, the National Institutes of Health, and public health departments; (2) government agencies’ expenditures for public employees’ health insurance coverage; and (3) federal, state, and local tax subsidies to health care.

To estimate direct government payments for health care, as well as government agencies’ expenditures for public employees’ health benefits, we used figures from the national health expenditure projections prepared by CMS’s Office of the Actuary.5,6

To calculate the value of health care–related tax subsidies, we first obtained the OMB’s official estimates of the value of the federal income tax and payroll tax subsidies to health care and health insurance each year.3

Like the federal government, state (and local) governments do not include the value of employer-paid health benefits when calculating income and income tax liability. Hence, we estimated state and local income tax subsidies in 2013 by multiplying the value of the federal income tax subsidy by the ratio of (local + state) income tax receipts to federal income tax receipts. We calculated this ratio with data from the Census Bureau’s quarterly surveys of state and local tax receipts7 and Internal Revenue Service data on federal income tax receipts.8 For future years, we assumed that the ratio would remain at the 2013 level.

The OMB’s estimates of health-related tax subsidies include tax subsidies to government employees, and we had already included the entire government contribution to its employees’ health benefits as a tax-financed expenditure. Hence, to avoid double-counting, we adjusted the tax subsidy estimates downward to exclude government employees based on government employers’ share of total employer-paid premiums as detailed in the CMS actuaries’ projections.4

These methods emulate those we used to estimate public spending in 1999,4 with 1 modification. In the past, we used multiple data sources and complex methods to estimate payroll tax subsidies because no official figures for these subsidies were available. In 2008, OMB began providing such figures, which serve as the basis for our current estimates. Compared with our older method, use of the more accurate OMB figure increases our estimate of government’s share by about 0.7%.

Finally, to offer perspective on the US taxpayer-funded health expenditures, we compared them to figures for several other developed nations by using data from the Organization for Economic Cooperation and Development (OECD).1

We carried out data management and analyses with Microsoft Excel 2003 (Microsoft, Redmond, WA).

RESULTS Section:
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Tax-funded expenditures for health care totaled $1.877 trillion in 2013 ($5960 per capita) (Table 1). Tax-funded expenditures’ share of overall health spending was 64.3% of total health expenditures in 2013. Projections suggest that government’s share will rise to 67.1% in 2024.
Data table

TABLE 1— Tax-Financed Health Expenditures (Billions of Dollars): United States, 2013–2024

Medicare will remain the largest category of tax-funded expenditures, rising from 20.1% of overall expenditures in 2013 to 22.5% in 2024 (Table 2). Medicaid’s share rose more than 1% between 2013 and 2015, coincident with the rollout of the Affordable Care Act’s (ACA’s) Medicaid expansion, and is projected to stabilize at about 17% of national health spending.
Data table

TABLE 2— Tax-Financed Health Expenditures as a Percentage of Total Health Expenditures and of Gross Domestic Product: United States, 2013–2024

Tax subsidies to private health spending totaled $294.9 billion in 2013, and are expected to remain about 10% of total health expenditures through 2024. 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. The vast majority of tax expenditures subsidize employer-sponsored coverage; subsidies to out-of-pocket expenditures account for only 4.1% of the total.

Government employers currently account for 28% of all employer payments for private health insurance, a figure that is projected to rise to 31% in 2024. Most of these expenditures (more than four fifths) are made by state and local governments.

Private employers’ spending for health insurance premiums as a share of national health expenditures reached a high of 18.5% in 2000 to 2001, falling to 16.7% in 2013, and are expected to decline to 14.5% in 2024. (These figures do not take account of tax subsidies, which would reduce these estimates by more than one third.)

As is well known, US health care costs are far higher than those in any other nation (Table 3). However, the high level of tax-funded spending in the United States receives less attention. Indeed, tax-funded 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. TRUNCATED- Read rest here:
The Current and Projected Taxpayer Shares of US Health Costs