Ultimate Source of Funding in the United States, Presented by Cathy A. Cowan National 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 PrivateGovernment BusinessesHouseholds Non- Patient RevenuesFederal State and Local Health Services and Supplies Private Sources of Funds Out-of-pocket Payments x Private Health Insurancexx xx Industrial Inplantx Other Private Revenues including Philanthropy x Public Sources of Funds Medicarexx xx Workers' Compensationx 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 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

Employer and Employee Contributions As a Percent of Employer-sponsored Health Insurance

Households Households spent $513 billion on health care in 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 Out-of- Pocket Medicare Insurance Premiums

Household Health Spending As a Percent of Personal Income 1 Sources:Centers for Medicare & Medicaid Services, Office of the Actuary: Data from the National Health Statistics Group, ; U.S. Department of Commerce, Bureau of Economic Analysis, Jan 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 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 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 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

Government Health Expenditures as a Percent of Federal, and State and Local Government Revenues Sources: Centers for Medicare & Medicaid Services, Office of the Actuary: Data from the National Health Statistics Group, and U.S. Department of Commerce, Bureau of Economic Analysis, Oct

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