Taxpayer Health Subsidies Table Explained

The data in the taxpayer health subsidies table below was obtained from various sources on the internet.  The sources are listed at the end of this post.  The taxpayer health subsidy amounts for each health plan (and Veterans Health) were obtained from actual expenditure numbers (non-group plans (on and off the ACA Exchange, Medicare, Veterans Health, Tricare, and FEHB) and from estimates for the ESI reduction (employer-sponsored plans).  The subsidy per beneficiary for each plan (last column) is an average value determined by dividing the total taxpayer subsidy by the number of eligible beneficiaries in each plan.

ACA Exchange subsidies are too low Comparisons of taxpayer health subsidies

The distribution of taxpayer health subsidies in the non-group plans (bought on the ACA Exchange) is skewed towards Americans with the lowest household incomes because these are the only plans in the table that are needs-based.   The Medicare taxpayer health subsidy includes only the funding taken from general revenue ($273 billion in 2015) and not from the other sources of funding (payroll taxes, premiums, tax on benefits, etc.).  This subsidy does not include the $15 billion Medicaid funds paid to low income/low asset Medicare beneficiaries to help pay for premiums and cost share (in 2015, the latest year with released data).   These Medicaid funds are delivered to 9.2 million Medicare beneficiaries under the Medicare Savings Programs (MSPs) and to 11.7 million beneficiaries under the Low Income Subsidy for Medicare Prescription Drug Coverage (also called Extra Help).

The taxpayer health subsidies that employees get (for those who work for both private and public employers) are an indirect subsidy.  This subsidy is often called the Employer Sponsored Insurance (ESI) exclusion.  By excluding the cost of health insurance premiums from income and payroll taxes, this tax break reduces the amount workers (and their employers) owe in taxes and thus reduces the after-tax cost of coverage.  For private employers, the employer’s contribution to the employees’ insurance premiums is also taxpayer-subsidized under the ESI exclusion.  This reduces the amount that the federal government takes in by about $250 billion every year. Unlike the taxpayer health subsidies for Americans buying insurance on the ACA Exchange, the ESI exclusion provides higher subsidies to employees who make higher incomes. This subsidy is part of the reason that employer-sponsored health plans are more generous (higher actuarial value) on average than those bought on the ACA Exchange and why employees’ wages are lower than they would be if the private employer did not have to provide health benefits.  For those receiving Tricare,  only Tricare Reserve Select comes with a premium and therefore it is the only Tricare plan that can take advantage of the ESI exclusion.

Government employees receiving FEHB receive two separate taxpayer subsidies—the ESI exclusion given under the heading of “employer-sponsored insurance” above and a government share for their health insurance premiums.  Currently the federal government picks up 72% of the weighted average premium costs from all plans offered.

The taxpayer health subsidy for veterans is used to pay for the care provided in about 150 hospitals, 1400 community-based outpatient clinics, living centers, Veteran Centers, and long-term care facilities owned and operated by the Department of Veterans Affairs.  As you can see above, the taxpayer is paying a high price per enrolled veteran ($7700) so that this small group of Americans can have their own little socialized medical system within the larger private healthcare system all other Americans must use.

The taxpayer subsidy for Tricare includes the spending given under “Total Unified Medical Program” and the receipt from the MERHCF trust fund within the Department of Defense (DoD).  It maintains 41 inpatient hospitals and medical centers, 315 ambulatory care and occupational health clinics, 201 dental clinics, and 198 veterinary facilities in the United States.

While my analysis is not rigorous (exact), the average values in this table do identify the inequality our government practices when it hands out taxpayer health subsidies. The table above does not include all insurance groups in the United States but those I have included should be enough to show that ACA subsidies (the only plans that are needs-based) are too low relative to all other plans.  Medicaid is not included in my comparison because, unlike Medicare, it is 100% needs-based health insurance with 50 different criteria for eligibility. Perhaps a taxpayer subsidy comparison between Medicaid and the non-group plans would reveal other insights.

Sources for Taxpayer Health Subsidies Table

Non-group plans (on and off the ACA Exchange):

Health insurance exchange enrollment

March 31, 2016 Effectuated Enrollment Snapshot

Health Insurance Marketplace Cost-Sharing Reduction Subsidies by Zip Code and County 2016


Report to the Congress:  Medicare and the Health Care Delivery System, June, 2017

Medicare Enrollment Dashboard

Chapter 4: Financial assistance to low-income Medicare beneficiaries

Employer-sponsored Insurance:

The Distribution of Major Tax Expenditures in the Individual Income Tax System

Tax Subsidies for Private Health  Insurance  

Tricare and Veterans Health:

Evaluation of the TRICARE Program Fiscal Year 2016 Report to Congress: Access, Cost, and Quality

Military Medical Care: Questions and Answers

2016 VA Agency Financial Report

Veterans Health benefits package


Federal Employees Health Benefits (FEHB) Program: An Overview 

U.S. Office of Personnel Management: Agency Financial Report, FY 2016 

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