3.1 Role of Public Sector in US Health Financing Has Increased

Module by: Christopher Conover. E-mail the author

Summary: regardless of how it is measured, the public sector role in U.S. health financing has increased.

Examining health financing from the standpoint of who literally pays the final bills, a rather steady expansion in the public-sector share of NHE that goes back at least 80 years becomes obvious (figure 3.1a). Starting in the 1960s, when both Medicare and Medicaid first began, the public share of financing increased much more sharply than it had previously.

From this standpoint of government as payer, Medicare is a federal responsibility because all funds flow through the general treasury before distribution to private administrators who pay claims from providers. This includes all the payroll taxes used to support Part A (inpatient hospital and nursing home services), together with the voluntary premiums for Part B (physician and other outpatient services) and Part D (prescription drugs). Medicaid—jointly financed by the federal and state governments —nominally increased state and local responsibility for care. In reality, the greatly expanded federal role in health care financing in 1965 displaced much of the traditional state and local government role in paying for care of the poor, disabled, and elderly. Consequently, the state and local share of health spending declined steadily since the 1960s as the federal share expanded. The federal displacement of private insurance and family out-of-pocket payments in this period was even greater.

An alternative way to view health spending is in terms of sources of revenue. Even though households ultimately incur the burden of all health spending, it is possible to differentiate revenues flowing from households, businesses, and various levels of government. In this so-called sponsor view, half of Medicare payroll taxes are assumed to be paid by employers and half paid by employees (households) rather than by the federal government. Conversely, the cost of the Federal Employee Health Benefits Plan (FEHBP) is shifted from private insurers (under the payer view) to the federal government (employer contributions) and households of covered members (premiums paid by federal employees/retirees).

From this sponsor view of health financing, the relative shares of spending paid by business, households, the federal government, and state and local governments have been remarkably stable over the past 20 years (figure 3.1b). Nevertheless, the public role in financing has grown slightly over this period.

Content actions

Add module to:

My Favorites Login Required (?)

'My Favorites' is a special kind of lens which you can use to bookmark modules and collections. 'My Favorites' can only be seen by you, and collections saved in 'My Favorites' can remember the last module you were on. You need an account to use 'My Favorites'.

| A lens I own Login Required (?)

Definition of a lens

Lenses

A lens is a custom view of the content in the repository. You can think of it as a fancy kind of list that will let you see content through the eyes of organizations and people you trust.

What is in a lens?

Lens makers point to materials (modules and collections), creating a guide that includes their own comments and descriptive tags about the content.

Who can create a lens?

Any individual member, a community, or a respected organization.

What are tags?

Tags are descriptors added by lens makers to help label content, attaching a vocabulary that is meaningful in the context of the lens.

Footer

This work is licensed by Christopher Conover under a Attribution (CC-BY 3.0), and is an Open Educational Resource.

Last edited by Jia Yao on Sep 12, 2013 6:29 pm -0500.