Ultimate Source of Funding in the United States, 1987-2003

Presented by

Cathy A. CowanNational Health Statistics Group

Office of the Actuary

Centers for Medicare & Medicaid Services

September 30, 2005

National Health Expenditure Accounts

National Health Expenditures

Accounts

Businesses, Households and

Governments

Health Spending

by Age

State Health Accounts;

Residence and Provide

Projections

SHA Definitions

• The first perspective, commonly used in National Health Accounts, aims a break down of expenditure on health into the complex range of third-party -payment arrangements plus the direct payments by households or other direct funders of , e.g., government provided health care.

• The second perspective asks for the ultimate burden of financing born by sources of funding . In this kind of analysis, the sources of financing of the intermediary sources of funding ( social security funds; private social and other private insurance; NPISHs) are traced back to their origin. Additional transfers such as intergovernmental transfers, tax deductions; subsidies to providers; and financing by the rest of the world are included to complete the picture.`

Structure of United States’ National Health Expenditures Accounts

Personal Health Care -- therapeutic goods or services rendered to treat or prevent a specific disease or condition in a specific person.

Health Services and Supplies – personal health care expenditures plus government public health activity, and program administration.

National Health Expenditures -- the combined value of health services and supplies, research, and construction.

Ultimate Source of Funding

• Disaggregation of health services and supplies

• By sponsors of health care– Businesses– Households– Governments

• Federal• State and Local

– Other private funds

Crosswalk of National Health Expenditures Payers to Business Households and

Government Sponsors 

  Private Government

  Businesses HouseholdsNon- Patient

Revenues FederalState and

Local

Health Services and Supplies          

Private Sources of Funds          

Out-of-pocket Payments   x      

Private Health Insurance x x   x x

Industrial Inplant x        

Other Private Revenues including Philanthropy     x    

Public Sources of Funds          

Medicare x x   x x

Workers' Compensation x     x  

Other Government Program          

Federal       x  

State and Local         x

Households$513 Billion

Governments$622 Billion

Businesses$423 Billion

Sponsors of Health Care, 2003

Private Health Insurance$601 Billion

Other Private$57 Billion

Out-of-pocket$230 Billion

Other Private$61 Billion

Medicare$283 Billion

Medicaid$267 Billion

Other Federal$67 Billion

Other State and Local$105 Billion

Health Services and Supplies $1,614 Billion

Data Sources

• Private Health Insurance– Employer sponsored health insurance

– Agency for Healthcare Research and Quality» Medical Expenditure Panel Survey

– Bureau of Labor Statistics» National Compensation Survey

– Individually purchased insurance– Bureau of Labor Statistics

» Consumer Expenditure Survey– Private Firms

• Public – Medicare

– Annual Report of the Boards of Trustees of the Federal Hospital Insurance and Federal Supplementary Medical Insurance Trust Funds

Businesses

• Businesses spent $423 billion for Health Services and Supplies in 2003.

• Included in business expenditures are:– Employers’ share of private health insurance

premiums

– Medicare Taxes (FICA)• Self-Employed• Employer

– Payments to workers’ compensation and temporary disability insurance

– Industrial inplant health services

Businesses Spent $423 Billion for Health Services and Supplies in 2003

Percent of Business Expenditures for Health Services and Supplies, 2003

Private Health Insurance Premiums

76%

Medicare Trust Fund

15%

Industrial Inplant

1%

Workers' Compensation

& TDI8%

Employer and Employee Contributions As a Percent of Employer-sponsored

Health Insurance

78%74% 76% 75%

22%26% 24% 25%

employer employee

1987 1997 2000 2003

Households

• Households spent $513 billion on health care in 2003.

• Household spending includes:– Out-of-pocket spending for copayments, deductibles

and services not covered by health insurance– Private health insurance premiums, either for

employer-sponsored or individually purchased policies

– Taxes paid to Medicare HI Trust Fund – Medicare SMI premiums.

Components of Household Health Care Spending

Calendar Years 1987 and 2003

Out-of-Pocket

58%

Insurance Premiums

23%

Medicare19%

45%

34%

21%

2003

1987

Out-of-Pocket

Medicare

Insurance Premiums

Household Health Spending As a Percent of Personal Income1

4.85.4 5.2 5.3

5.9

0

1

2

3

4

5

6

7

1987 1992 1997 1999 2003

Calendar Years

Per

cen

t

Sources:Centers for Medicare & Medicaid Services, Office of the Actuary: Data from the National Health Statistics Group, 1987-2003; U.S. Department of Commerce, Bureau of Economic Analysis, Jan. 2005.

1 Adjustments to personal income include the addition of contributions to social insurance for Medicare, since they are included in individuals' health spending, and the exclusion of health benefit payments

State and Local Governments

• State and local governments spent $278.1 billion on health care in 2003.

• State and Local government spending includes:– State and Local government as an employer

• Private health insurance• Medicare HI payroll taxes

– Medicaid– Hospital subsidies– Other State and local programs

State and Local Government Health Spending, 2003

Private Health Insurance Premiums

31%

Medicaid40%

Medicare HI Trust Fund

Payroll Taxes3%

Other Programs26%

Other includes other public and general assistance, maternal and child health, vocational rehabilitation, public health activities, an state Children’s Health Insurance Program (SCHIP).

Federal Government

• Federal government health care spending reached $344 billion in 2003.

• Federal Government health spending includes:– Federal Government as an employer

• Private health insurance premiums• Medicare HI payroll taxes• Workers Compensation

– Medicare – Medicaid– Other Federal programs

Federal Health Care Spending, 2003

Private Health Insurance Premiums

6%

Other Programs19%

Medicaid47% Medicare HI

Trust Fund Payroll Taxes

1%

Medicare27%

Government Health Expenditures as a Percent of Federal, and State and Local

Government Revenues

0

5

10

15

20

25

30

35

1987 1990 1992 1997 2000 2001 2002 2003

Calendar Year

Per

cent

Federal State and local

Sources: Centers for Medicare & Medicaid Services, Office of the Actuary: Data from the National Health Statistics Group, 1993-2003 and U.S. Department of Commerce, Bureau of Economic Analysis, Oct. 2004.

Future Challenges –Business Households and Governments• Changing structure of the health insurance industry • More timely information, especially from other government sources

• Greater coordination of employer and employee survey collection instruments

• Incorporation of the MMA provisions

• Incorporation into our annual release of the NHEA