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Who really pays for health care? It might surprise you
Households paid biggest share of health costs in ’12
Jay Hancock
Kaiser Health News
Eight million people have signed up for subsidized private health insurance under the Affordable Care Act, President Obama said this month. Millions more obtained new coverage through Medicaid.
Full implementation of the health law and its wider coverage, new taxes and shifting subsidies have renewed talk of winners and losers, makers and moochers.
Here’s a corrective to common misconceptions about who pays for health care.
1Before Obamacare, we had a free-market health care system.
Government has been part of the business of medicine at least since the 1940s, when Washington began appropriating billions to build private and government hospitals. The drug industry and its customers owe much to federally funded research.
Medicare for seniors and Medicaid for the poor, which both began in the 1960s, represent direct government transfers from some taxpayers to others. States have set rules for health insurance for decades.
If you’re insured through an employer that files an income tax return, your coverage is subsidized by the feds. Tax deductions for private medical coverage cost the Treasury $250 billion a year.
What the healthy pay in premiums finances care for the sick. Few patients except foreign potentates have paid their own medical bills for a long time.
2I fully paid for Medicare through taxes deducted from salary.
Scholars at the Urban Institute have calculated that the typical Medicare beneficiary who retired in 2010 will cost the system more than twice as much in health costs than the beneficiary and employer paid in Medicare taxes.
It’s another subsidy. If Congress had designed Medicare to pay for itself rather than add to the budget deficit every year, payroll taxes would be far higher and your take-home pay would have been far lower.
3Premiums from my paycheck fund my company health plan.
Probably not entirely. Or even mostly.
For family coverage, which costs an average of $16,351 last year, the average worker paid only 29% of the premium. For single-person coverage, workers paid 18% of the (lower) total cost.
Although premiums and outof- pocket costs have soared for consumers, costs have been rising for employers, too — up 80% in a decade. Business spends more than half a trillion dollars annually on employee health care.
4Government and employers pay for almost all health care.
But give workers and consumers credit. In 2012, households still paid the largest single share of health costs, according to federal actuaries. Part was premiums paid through employers and directly to insurers. Part was outof- pocket expense.
The household portion of the health spending pie shrank from 37% in 1987 to 28% in 2012. It’s still larger than the federal government’s 26% share or business’s 21%.
5The insurance company is always the bad guy.
Human resources pros like to trash-talk the company’s insurance plan when they tell employees the doctor network shrank, the deductible rose or some procedures aren’t covered.
But more than half of all workers with coverage are enrolled in “self-insured” plans where the employer pays medical bills directly. The insurance company only processes claims. If your company has at least 500 workers, it is probably self-insured.
In such plans, the employer is the insurance company. And it’s the employer calling the shots.
Kaiser Health News is an editorially independent program of the Kaiser Family Foundation.
Households paid biggest share of health costs in ’12
Jay Hancock
Kaiser Health News
Eight million people have signed up for subsidized private health insurance under the Affordable Care Act, President Obama said this month. Millions more obtained new coverage through Medicaid.
Full implementation of the health law and its wider coverage, new taxes and shifting subsidies have renewed talk of winners and losers, makers and moochers.
Here’s a corrective to common misconceptions about who pays for health care.
1Before Obamacare, we had a free-market health care system.
Government has been part of the business of medicine at least since the 1940s, when Washington began appropriating billions to build private and government hospitals. The drug industry and its customers owe much to federally funded research.
Medicare for seniors and Medicaid for the poor, which both began in the 1960s, represent direct government transfers from some taxpayers to others. States have set rules for health insurance for decades.
If you’re insured through an employer that files an income tax return, your coverage is subsidized by the feds. Tax deductions for private medical coverage cost the Treasury $250 billion a year.
What the healthy pay in premiums finances care for the sick. Few patients except foreign potentates have paid their own medical bills for a long time.
2I fully paid for Medicare through taxes deducted from salary.
Scholars at the Urban Institute have calculated that the typical Medicare beneficiary who retired in 2010 will cost the system more than twice as much in health costs than the beneficiary and employer paid in Medicare taxes.
It’s another subsidy. If Congress had designed Medicare to pay for itself rather than add to the budget deficit every year, payroll taxes would be far higher and your take-home pay would have been far lower.
3Premiums from my paycheck fund my company health plan.
Probably not entirely. Or even mostly.
For family coverage, which costs an average of $16,351 last year, the average worker paid only 29% of the premium. For single-person coverage, workers paid 18% of the (lower) total cost.
Although premiums and outof- pocket costs have soared for consumers, costs have been rising for employers, too — up 80% in a decade. Business spends more than half a trillion dollars annually on employee health care.
4Government and employers pay for almost all health care.
But give workers and consumers credit. In 2012, households still paid the largest single share of health costs, according to federal actuaries. Part was premiums paid through employers and directly to insurers. Part was outof- pocket expense.
The household portion of the health spending pie shrank from 37% in 1987 to 28% in 2012. It’s still larger than the federal government’s 26% share or business’s 21%.
5The insurance company is always the bad guy.
Human resources pros like to trash-talk the company’s insurance plan when they tell employees the doctor network shrank, the deductible rose or some procedures aren’t covered.
But more than half of all workers with coverage are enrolled in “self-insured” plans where the employer pays medical bills directly. The insurance company only processes claims. If your company has at least 500 workers, it is probably self-insured.
In such plans, the employer is the insurance company. And it’s the employer calling the shots.
Kaiser Health News is an editorially independent program of the Kaiser Family Foundation.
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