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

1. Ultimate Source of Funding in the United States, 1987-2003 Presented by Cathy A. Cowan National Health Statistics Group Office of the Actuary Centers for Medicare & Medicaid Services September 30, 2005

2. National Health Expenditure Accounts Businesses, Households and Governments National Health Expenditures Accounts Projections State Health Accounts; Residence and Provide Health Spending by Age

3. 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.`

4. 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.

5. 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

6. Crosswalk of National Health Expenditures Payers to Business Households and Government Sponsors

7. Sponsors of Health Care, 2003 Health Services and Supplies $1,614 Billion Private Health Insurance $601 Billion Households $513 Billion Out-of-pocket $230 Billion Other Private $61 Billion Businesses $423 Billion Medicare $283 Billion Medicaid $267 Billion Governments $622 Billion Other Federal $67 Billion Other Private $57 Billion Other State and Local $105 Billion

8. 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

9. 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

10. Percent of Business Expenditures for Health Services and Supplies, 2003 Businesses Spent $423 Billion for Health Services and Supplies in 2003

11. Employer and Employee Contributions As a Percent of Employer-sponsored Health Insurance 1987 1997 2000 2003

12. 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.

13. Components of Household Health Care SpendingCalendar Years 1987 and 2003 Medicare Out-of-Pocket Insurance Premiums 2003 1987

14. Household Health Spending As a Percent of Personal Income1 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 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.

15. 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

16. 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).

17. 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

18. Federal Health Care Spending, 2003

19. 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, 1993-2003 and U.S. Department of Commerce, Bureau of Economic Analysis, Oct. 2004.

20. 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