What Percentage of US Healthcare Is Publicly Financed?

Public, taxpayer-funded health care spending will pay for for 53% of US health care in 2009. If health care tax breaks are included, this figure rises to 62%.

Of the $2.5 Trillion dollars expected to be spent in the United States on health care this year, what percentage is paid by taxpayers? The Kaiser Family Foundation calculates that 46% of health care spending was publicly financed in 2006, but this number seems to exclude health care for government employees. The Center for Medicare & Medicaid Services collects data on health care spending in its National Health Expenditure survey, which can be used to perform a direct calculation on the government share of health care financing. The following table summarizes the 2007 NHE data, the latest year for which a detailed breakdown is available:

Category Amount (2007 $ Billions)
Medicare [1] 418
Medicaid (Including State Funding) 340
Other Public Health Programs [2] 189
Federal, State, and Local Employee Health Care 134
NIH and FDA Budgets [3] 32
Total Public Spending 1113
All Private Health Spending 1018
2007 Total US Health Spending 2131

The 2007 data show that 52% of all health care in the United States is publicly financed. The NHE data also show that from 1987 to 2007, the government’s share of health care financing has risen by ten percentage points, or about half a percentage point per year. This means that in 2009, the public share of health care spending is likely at 53%, or perhaps higher as a result of rising unemployment due to the recession. If health care subsidies (primarily tax exemptions) are included as government financing of health care, they add another $200 Billion to the total, raising the government’s share of health care spending to 62%.

With the government already paying for the majority of US health care, one thing is clear about the current health care reform debate: The debate is not about whether the government will take control of the health care system, as that has quietly taken place over the last 40 years. The real debate is about how the government should distribute its health care spending, and on whether it will be able to rein in endless health care cost growth.

[1] The detailed NHE data split up by source of payment can be found here:

In calculating the numbers in the above table, I used Table 1 in the pdf. I allocated all costs associated with Medicare to the public sector, unlike the table in the pdf, which counts Medicare premiums and contributions as private sector payments. From a standpoint of determining government involvement in the health care system, it makes more sense to count all Medicare dollars as public financing, particularly since paying Medicare taxes is precisely how most of the Medicare system is funded!

[2] According to the NHE pdf, other federal, state, and local health programs “Includes maternal and child health, vocational rehabilitation, Substance Abuse and Mental Health Services Administration, Indian Health Service, Office of Economic Opportunity (1965-74), Federal workers’ compensation, and other miscellaneous general hospital and medical programs, public health activities, Department of Defense, Department of Veterans Affairs, and State Children’s Health Program (SCHIP)” and “Includes other public and general assistance, maternal and child health, vocational rehabilitation, public health activities, hospital subsidies, and state phase-down payments.”

[3] The NIH budget is $30 Billion, and can be classified entirely as health care spending, though it’s often left uncounted. But isn’t research to cure disease health care spending? If it’s not, then what exactly is it? I have also included two-thirds of the FDA budget, as that is the portion related to drug and medical device supervision.

6 thoughts on “What Percentage of US Healthcare Is Publicly Financed?

  1. Brilliant presentation. A few years back I saw a documentary on PBS that was comparing 7 healthcare systems throughout the world… it is quite possible you have seen it before. It was, US, England, Japan, Germany, Switzerland, Singapore, and France.

    Oddly, when I got to the part about Switzerland I noticed that there was some talk about the pharmaceutical companies and about how the change in policy would devastate these areas. At some point later on a pharma representative comes on a talks about how the change had not affected the profits much, this was because the largest chunk of what they made was earned here in the US.

    We have a larger lobby to contend with here

    I am gathering information on the healthcare debate. Please visit my blog http://urtak.com/u/310 it has a series of questions. If you are interested you can post questions as well. All are encouraged, please pass the link on to others.

  2. I would be interested to know some kind of breakdown that shows the actual cost of the health care coverage provided by the government and private for profit insurance companies. It seems like the for profit insurance companies take the “cream”, insure the healthy and wealthy people, while the government programs take care of the poor, aged and sicker population. First, is this assumption on my part true? Second, if we do insurance reform with a public option, what would prevent the insurance companies from receiving even more of the “cream” while the government gets stuck with the more high cost high risk portion of our population?

    Will Munger
    Duluth, Minnesota

    1. Will, thanks for the comment/question. The government today does take care of a population that is on average sicker than the population at large. The government runs Medicare, which insures almost all American seniors, and it runs Medicaid (along with the states), which insures many poor Americans.

      Seniors are obviously less healthy than average, because all humans die eventually – and Medicare is generally the payor for expensive end of life care. Poorer Americans typically have higher incidences of obesity, diabetes, heart disease, and other conditions, and so those costs fall disproportionately on the government as well.

      With regard to a public option, the health care reform proposals currently under debate remove the ability of insurers to reject individuals based on medical history – presumably this will help even the sick get private insurance. It remains to be seen how the final reform plan will be structured, however, so this question can’t be fully answered just yet.

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