Academic journal article Social Security Bulletin

Private Social Welfare Expenditures, 1972-94

Academic journal article Social Security Bulletin

Private Social Welfare Expenditures, 1972-94

Article excerpt

Private Social Welfare Expenditures, 1972-94*

The private social welfare expenditure series provides estimates on private-sector financing of social welfare programs in the United States. It complements the parallel public social welfare expenditures series, but does not have a one-toone relationship with it.1 This note covers the period of 197294. To maintain internal consistency, it has been revised to reflect the new National Income and Products Account (NIPA) benchmarks published in the January/February 1996 issue of the Survey of Current Business.

Conceptually, private expenditures can be grouped into four major program categories:

health and medical care;

welfare services;

education; and

income maintenance.

Private outlays account for a large share of national health and medical care expenditures, as well as income-maintenance benefits in the form of employment-related pensions, group life insurance, and group sickness payments. The private sector is also an important source of financing for education and social services.

Viewed as a gross domestic product (GDP), private-sector social welfare has gradually but substantially increased from 7.7 percent in 1972 to 13.3 percent in 1994 (table 1). In the latter year, total expenditures were $921,465 billion, compared with $873,871 billion in 1993 (an increase of 5.4 percent). By comparison, public expenditures for social welfare programs increased from 16.6 percent of GDP in fiscal year 1972 to 21.1 percent in 1993. Total spending for social welfare programs, both public and private, increased from 23.5 percent of GDP in 1972 to a 33.0 percent share in 1993.

In 1994, health and medical care expenditures claimed the largest dollar amount-$528.6 billion (57.4 percent of total private spending). Private-sector funds paid 55.5 percent of all personal health care expenditures, mostly private health insurance and out-of-pocket spending (table 2). From 1972 through 1994, health expenditures declined slightly, from 58.5 percent to 57.4 percent of total private social welfare spending.

The "welfare services" category includes individual and family social services, residential care, child day care, recreation and group work, and job training and vocational rehabilitation. In 1994, expenditures for these items were $86.3 billion, or 9.4 percent of the year's private social welfare total.

Private expenditures for education in 1994 were $101.8 billion, 11.1 percent of all private social welfare expenditures. Of this amount, $59.7 billion was spent on higher education, $21.2 billion on elementary and secondary education, and $15.5 billion on commercial and vocational schools. Outlays for education have declined from 15.6 percent of total privatesector spending in 1972 to 11.1 percent in 1994.

Income-maintenance expenditures are payments made by private-sector employee benefit plans. These include private pension plans, group life insurance, cash disability insurance, paid sick leave, and supplemental unemployment benefits. Of the $204.7 billion in such expenditures in 1994 (table 1), pension benefits accounted for $174.5 billion.

Health and Medical Care

The Office of the Actuary in the Health Care Financing Administration (HCFA) prepares annual estimates of health and medical care expenditures from both public and private sources.2 These are based on the National Health Accounts, which provide a structure for understanding a broad range of health care spending. In 1994, total spending for health amounted to $949.4 billion or 13.7 percent of GDP (table 2); the private-sector share amounted to $528.6 billion, 55.7 percent. Private health payments have grown from 4.5 percent of GDP in 1972 to 7.6 percent in 1994.

The relative shares of private and public expenditures for health remained fairly constant from 1972 to 1990 (as can be seen by comparing lines 2 and 6 of table 2). …

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