America spent 17.3% of its gross domestic product on health care in 2009 (1). If you break that down on an individual level, we spend $7,129 per person each year on health care…more than any other country in the world (2). With 17 cents of every dollar Americans spent keeping our country healthy, it’s no wonder the government is determined to reform the system. Despite the overwhelming attention health care is getting in the media, we know very little about where that money comes from or how it makes its way into the system (and rightfully so…the way we pay for health care is insanely complex, to say the least). This convoluted system is the unfortunate result of a series of programs that attempt to control spending layered on top of one another. What follows is a systematic attempt to peel away those layers, helping you become an informed health care consumer and an incontrovertible debater when discussing “Health Care Reform.”
Who’s paying the bill?
The “bill payers” fall into three distinct buckets: individuals paying out-of-pocket, private insurance companies, and the government. We can look at these payors in two different ways: 1) How much do they pay and 2) How many people do they pay for?
The majority of individuals in America are insured by private insurance companies via their employers, followed second by the government. These two sources of payment combined account for close to 80% of the funding for health care. The “Out-of-Pocket” payers fall into the uninsured as they have chosen to carry the risk of medical expense independently. When we look at the amount of money each of these groups spends on health care annually, the pie shifts dramatically.
The government currently pays for 46% of national health care expenditures. How is that possible? This will make much more sense when we examine each of the payors individually.
Understanding the Payors