Academic journal article Health Care Financing Review

Business, Households, and Governments: Health Care Costs, 1990

Academic journal article Health Care Financing Review

Business, Households, and Governments: Health Care Costs, 1990

Article excerpt


National health expenditures consumed 12.2 percent of the gross national product (GNP) in 1990 (Levit et al., 1991) and are expected to rise to 16.4 percent of GNP in the year 2000 (Sonsefeld et al., 1991). These increases raise concern over the availability of resources to pay for upwardly spiraling health care costs--resources that differ by sponsor. By measuring the burden health care costs impose on each sponsor, we can track mounting pressure within the separate sponsor sectors that will trigger change. These pressures have been building for both businees and government for several decades; however, for the household sector, increasing health care cost burdens are only beginning to be felt.

The analysis presented in this article builds on the national health accounts (NHA), which present spending by health care bill payers such as Medicaid, Medicare, and private health insurance. The NHA estimates are rearranged and disaggregated to permit an examination of sponsors of health care who provide funding to bill payers. These major sponsors of health care are business, households, government, and non-patient revenues. Their spending is measured as expenditures for health services and supplies (HSS) that represent the cost of health care excluding research and construction. Some payments for HSS by sponsors pass through health care bill payers such as insurance and government, while other payments (e.g., out-of-pocket, non-patient revenues) flow directly into the health care system (Figure 1). In this article, one additional level of payer is revealed beyond those presented in NHA. Ultimately, however, the individual bears the primary responsibilty of paying for health care through health insurance premiums, out-of-pocket costs, philanthropic contributions to health organizations, income taxes, earnings reduced by increases in employers' health insurance costs, and higher cost of products.

HSS amounted to $643.4 billion in 1990, an increase of 10.5 percent since 1989, the third consecutive year that HSS has grown at double-digit rates. Over time, the primary responsibility for sponsoring health care costs shifted from the household to other sources, such as business and goverment. In 1965, households paid for 61 percent of all HSS, with business accounting for 17 percent and public programs accounting for 21 percent. By 1990, the distribution of payments changed, so that each of the major components accounted for approximately one-third of the health care cost (Figure 2). Because of these changes, business is becoming extremely concerned over the costs of health care and the amount of resources being consumed. This was especially true in 1990, as the United States entered a recession. The recession caused growth in consumer spending for most goods and services to slow down, while spending for health care continued to grow unabated.

Business paid $186.2 billion for health care in 1990 (Table 1), 29 percent of HSS. Business estimates include expenditures for all types of organizations--sole proprietorships, partnerships, and corporations. These payments cover employer contributions to health insurance premiums for employees, mandatory employer contributions to the Medicate hospital insurance trust fund, workers' compensation medical premiums, temporary disability medical insurance, and industrial inplant services.

The employer contribution to employee health insurance premiums accounts for the largest portion of private business health spending: $139.1 billion, or 75 percent. The second-largest component is the employer contribution to the Medicare hospital insurance trust fund, which, at $29.7 billion, holds a 16-percent share. Workers' compensation, temporary disability insurance, and industrial inplant health services comprise the remaining $17.4 billion, or 9 percent of private business health spending. Since the advent of Medicare and Medicaid in 1966, these component shares of private business health care expenditures have remained stable. …

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