Leading policy-makers and scholars explain how market forces, deregulation, and consumer choice can work to improve health care for all Americans.


National Health Care? We're Halfway There
Daniel Gross, The New York Times, 12-3-06

Gross makes a very accurate and interesting observation—that the federal government already pays, through tax subsidies and programs like Medicare and Medicaid—about half of the nation's health care costs.

In that sense, fans of single-payer health care can take comfort in the fact that the U.S. is already halfway towards a Canadian–style health care system. But we would argue that the existing funding structure just underscores the fact that the government is going about funding health care in the wrong way–subsidizing providers or employers rather than empowering individual consumers to purchase and manage their own insurance in a private market.

Gross is correct that we aren't getting the full value of our health care spending—but wrong to suggest that government control of health care would correct the underlying problem.

While the administration may oppose government–run health care in principle, the government's role in the vast health industry has been expanding. By various measures, the United States is about halfway toward a system in which the government and taxpayers fully fund health care. And trends are pushing the government to become more involved each year.

Out of a total population of about 300 million, 35.6 million elderly Americans were on Medicare in 2005. Of the working–age population, which reached 257.8 million in 2005, some 45.5 million were covered by Medicare, Medicaid or military health programs, according to the benefits institute. An additional 18.2 million workers had health insurance through jobs in the public sector, which includes state, federal and local governments, public schools and state universities, according to Paul Fronstin, director of the institute's health research and education program. Millions of those workers' dependents are covered as well. Even if those dependents are not included in the tally, taxpayers paid the bill for almost two–fifths of all Americans with insurance in 2005.

But that's not the full extent of government and taxpayer involvement. Employer–provided health insurance premiums are a form of compensation, yet are not subject to federal payroll or income taxes and are exempt from many state and local taxes. Economists consider these exemptions a form of subsidy. Thomas M. Selden, economist at the federal Agency for Healthcare Research and Quality, estimates that the tax subsidy for employment–related coverage at $208.6 billion in 2006, or 35.4 percent of the amount spent on premiums.

"The tax subsidy is one of the largest public expenditures on health care," Mr. Selden said. In fiscal 2006, by comparison, spending on Medicare was $378.7 billion and federal spending on Medicaid was $180.6 billion.

Viewed strictly in terms of dollars and cents, the government already accounts for more than half of the nation's health care spending. Mining data from the National Health Expenditures Accounts, Mr. Selden found that public expenditures on health care—Medicare, Medicaid, military health care and federal employee benefits—accounted for $888 billion of the $1.96 trillion spent on health care in 2004. курсы турагентов Adding in the aforementioned subsidies, and premiums paid for public–sector employees, the total comes to $1.2 trillion, or 61 percent.

Uwe E. Reinhardt, the James Madison professor of political economy at Princeton, suggests adding 5 percent for the federal mandate that hospitals provide free health care to the uninsured. "So government accounts for about two–thirds of health care spending," Mr. Reinhardt said.

Project FDA.
home   spotlight   commentary   research   events   news   about   contact   links   archives
Copyright Manhattan Institute for Policy Research
52 Vanderbilt Avenue
New York, NY 10017
(212) 599-7000