This article provides estimates of healthcare expenditures by businesses, households,and governments for 1987-2003. Sponsorsthat finance public and private healthinsurance programs and other payers faceincreasing challenges as health care cost rise. Their capacity to support rising costswas particularly strained during the recent economic recession, with the FederalGovernment’s burden measured against revenue available for this purpose growing faster than for other sponsors.
In this article, we present a view of health care spending in the U.S. that focus-es on the sectors that finance or sponsorhealth care. The three broad categories of sponsors are businesses, households, andgovernments. This view allows us to exam-ine each of the sponsor’s ability to pay fortheir health care obligations. The basis forthese estimates is the national healthexpenditure accounts
, the official FederalGovernment estimates of total U.S. healthcare spending (Centers for Medicare &Medicaid Services, 2005).The NHEA structure is a matrix com-prised of expenditures for health caregoods and services and of funding sourcesthat pay for these goods and services.These sources of funds are classified intoprivate health insurance (PHI), out-of-pocket spending, other private revenues,and specific government programs such asMedicare and Medicaid. For nationalaccounting, this structure is useful in mea-suring changes in spending trends associ-ated with policy initiatives in the govern-ment and private sectors, along with theamounts paid by each source.The analysis in this article is based on asubset of the National Health Expen-ditures. This subset, health services andsupplies (HSS), represents spending forhealth care provided during the year,including personal health care, govern-ment public health and program adminis-tration. In 2003, HSS was about 96 percentof National Health Expenditures, whichalso include investment, research, and con-struction expenditures.To determine where the responsibilityfor financing health care falls, we reorga-nize spending into business, household,and government sectors. This reallocationto the sponsors of health care is as follows:• PHI—Allocated to businesses, Federal,and State and local government employ-ers and employees (or households) whopay for employer-sponsored healthinsurance premiums, and to individuals(or households) who purchase healthinsurance directly.• Medicare—Distributed between employ-ers (businesses, Federal, and State andlocal governments), and employees(households) are the payroll taxes
HEALTH CARE FINANCING REVIEW/ Web Exclusive /July 2005/
Volume 1, Number 2
Financing Health Care: Businesses, Households, andGovernments, 1987-2003
Cathy A. Cowan, M.B.A. and Micah B. Hartman