Every time health care reform comes up for debate, I see people arguing about whether a publicly or privately funded system would be better. The Affordable Care Act, in an attempt to forestall this debate, decided to split the baby, and give half of its newly insured beneficiaries public insurance (Medicaid) and half private insurance (insurance exchanges). But this isn't really true. Yes, the half of people getting expanded Medicaid are getting public insurance, but the vast majority of people getting private insurance are also getting public funds (subsidies) in order to purchase their private insurance.
In other words, even though we expanded private insurance, we're doing it with taxpayer dollars. Overall, the reduction in the uninsured was due to mostly public spending, with relatively little private spending overall. This isn't rare in the US health care system. A recently released policy brief from the UCLA Center for Health Policy Research, "Public Funds Account for Over 70 Percent of Health Care Spending in California", explains this quite well.
If you just look at a simple analysis of Medicaid, Medicaid, and CHIP, you might find that about 45% (or less than half) of total US health care spending is public. But that ignores a ton of health care spending that is also paid for with public funds outside those programs. In an effort to document the different, researchers looked at health care spending in California. They included four major public funding categories:
- Payments for public health insurance programs (like Medicare and Medicaid)
- Government payments for health insurance coverage for public employees (like me at Indiana University, for instance)
- Tax subsidies for employer-sponsored insurance and those purchasing exchange plans who earn less than 400% of the poverty line
- County health care expenditures
Everyone accounts for #1 in their analyses. Most people also account for #4. Too many ignore #3, though. The tax expenditures for employer-sponsored health insurance are massive in the US, and the exchange subsidies aren't cheap either. Almost everyone ignores #2, though. All the people who work for the government, who work for public schools, or the police department, etc. all get private insurance, but you (taxpayers) are paying for it. People like me! I'm grateful to you, by the way, but I'm "on the public dole" as much as anyone in this respect.
In California, health care expenditures in 2016 are estimated to be more than $367 billion. That's one state. Let that sink in for a minute. But much of that is public health expenditures. About 27% are from Medi-Cal/Healthy Families. About 20% is Medicare. The tax expenditures for employer-sponsored private insurance are 12%. though. Public spending for private insurance is 4%, county health expenditures are 3%, ACA exchange subsidies are about 2%, and "other" government programs are about 3%. Add all that up, and public health expenditures in California are almost $261 billion, or about 71% of all health care spending.
What's left for private? About 16% of spending is employer shares of premiums, 6% is employee shares of premiums, 4% are out-of-pocket spending for covered benefits, and 3% are premiums for individually purchased plans.
Some caveats: California spends a bit more in public funds than the rest of the country. Their Medicaid expenditures are a bit higher, as their 33% of the state being on Medicaid is higher than the national average. They also have a bit more in tax expenditures for employer-sponsored private health insurance than the national average. The national average for public share of health care spending is 65%, not the 71% they have.
But even that might give some pause. Even nationally, more than two-thirds of health care spending is being done by taxpayers, through public funds. We may have a "private" health insurance system. But much, much more of it is being paid for through public funds than many think.
–Aaron