Health Spending–Who Really Pays?

health spending who really pays…You Do!

Our government puts out all kinds of national health spending data and packages it to deliver every message, but one—when it comes to health spending, who really pays?   In our healthcare system, the word payer  means “the entity that controls payment” (the insurance companies and government) and not  “the one who pays”. Healthcare payments are delivered piecemeal to healthcare businesses– directly from patients (out-of-pocket) and indirectly through employers, insurance companies and government. This convoluted payment system has lulled many individual Americans with low out-of-pocket healthcare costs to believe that they are personally getting away with low healthcare costs. I’ll let you in on a little secret…individual Americans (some more than others) are actually paying for the majority of all healthcare spending in the United States! Not employers!  Not the government!  And definitely not the insurance companies! YOU ARE!  As a taxpayer, you are not only paying for your personal health care, you are also paying for the health care of a lot of other people through various government-sponsored programs.

From the latest data for national health spending put out by our government in the document entitled “National Health Expenditures 2014”, I see that spending has increased 5.3% from 2013 to reach $3.031 trillion ($9,523 per person with 318 million people in USA). This National Health Expenditure Accounts (NHEA) data is subdivided by type of service or product, by major sources of fund,and by type of sponsor. In this blog post, I will make an attempt to get to the bottom of “who is actually paying for health care in the United States” and I will use the data categorized by type of sponsor.   Let’s dive in.

National Health Expenditures by Sponsor

Type of sponsor?  What does that mean?  Is sponsor different from payer?  The odd choice of the word sponsor has my “something fishy here” radar on full alert.  In the world of government health care, the definition of sponsor (found in the document’s footnotes),reads as follows:

” the entity that is ultimately responsible for financing the health care bill, such as a private business, household, or government. These sponsors pay insurance premiums and out-of-pocket costs, or finance health care through dedicated taxes or general revenues”.

I have had to reread this statement three times to understand what it was really saying. The word sponsor actually has two meanings here—one for households and private businesses (they directly pay insurance premiums and out-of-pocket costs) and another for governments (they finance health care through dedicated taxes (payroll taxes) or general revenues (income taxes)).  When a local business sponsors a little league team, it pays for uniforms and other perks–it does not collect the money directly from parents and then buy the uniforms with its name emblazoned on the jerseys.

Let’s get to work analyzing the data. Our government subdivides sponsor into private businesses (employers), households (individuals), other private revenues (philanthropic organizations) and governments (federal, state, and local). I have taken their data and put it in pie chart and tabular form below.health spending who really pays by sponsorAccording to the data, federal, state, and local governments sponsor (finance) 45% of all health spending in the United States.  This sounds very generous of them, but where is this money actually coming from?  They can either print new money to pay for it (a really bad thing for our economy) or they must get it from taxpayers.

Health Spending Who Really Pays?

Let’s take the packaged data from the government and create a new packaged data set that more accurately reflects who is paying for health care in the United States.  In other words, I am taking the federal, state, and local governments financed contribution to health spending and backtracking to where the money actually originated (i.e., taxpayers).  Any intermediary entities (governments or insurance companies) who may happen to hold taxpayer’s money before it is distributed for health care is being removed in my analysis leaving only households, private businesses, and other. I will replace the word sponsor with ultimate payor (the entities that directly pay health insurance premiums and out-of-pocket healthcare costs and indirectly pay the taxes that fund health spending). In my analysis, the federal, state & local categories would disappear.

I will be making the following assumptions to generate health spending by ultimate payor:

  1. the federal, state, and local government contributions to health spending come from taxpayers in the year they were spent (it actually comes from taxpayers one way or another from multiple years)
  2. I am leaving the “other” group unchanged because I don’t know enough about this category to include them in my analysis
  3. taxpayers consist of households and private businesses

This analysis can be tweaked for accuracy by a more vigorous treatment and I invite the experts out there to supply the details.

Using a rough 70% households/30% private businesses  federal tax revenue ratio and a 86% households/14% private businesses state & local tax revenue ratio, the new pie chart and table showing national health spending by ultimate payor becomes

health spending who really pays by ultimate payor

The important message here is that the individual American household is PAYING for the majority of all health care expenditures in the USA either directly or indirectly through taxes (payroll, income, etc.)!!! This is an important concept because many of us think that our personal out-of-pocket health spending represents the total health spending we incur. Nebulous terms like sponsor mask the underlying truth that we Americans are paying for most of the health spending in our country—our own and the health care of fellow Americans.  As a taxpayer, even if you spend zero dollars for your personal health care, you are still paying for the health care of the elderly, the poor, veterans, government employees, Native Americans, and many more.

In the analysis above, households pay for 62% of all health spending in the United States. It can be argued that this figure is actually higher because the health spending contribution by private businesses actually comes out of money that could have gone to employee wages instead.

Our government officials do not advertise the information given in the figure above because the electorate needs to be manipulated to accept taxation and/or cuts to healthcare benefits as the out-of-control health costs demand.  We are manipulated to turn on each other (the healthy on the sick, the young on the elderly, the rich on the poor, etc.) instead of uniting as one group for Affordable Health Care and Beyond for ALL Americans.  We are not meant to be educated and be a part of the solution.

The Bottom Line

Think for yourselves! Most of us never question data delivered to us by the organizations that are supposed to serve and protect us.  We are easy prey to manipulation when we do not use our brains to think critically and “engage”.  The same national health spending data can be packaged in different ways to deliver different messages. Our government does not want you to know that you, individual Americans, are in fact paying for the majority of our overpriced and inefficient healthcare system.  Healthcare excesses are not going into taxpayer’s pockets, but in the coffers of for-profit healthcare businesses.  Heaven help us if individual Americans get together and demand change and increased efficiency in return for handing over their hard-earned money.

Isn’t it time that we took a more active role for Affordable Health Care and Beyond for ALL Americans?   When I tell you that we Americans are spending twice  as much as other developed nations, I mean you personally are paying twice as much for the same (or inferior) health care. Obamacare reform does not have provisions to tackle affordability issue head on.  We need to answer the call for action!

 

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