Posted on July 9, 2002

Government Funds 60% of U.S. Healthcare Costs


David Himmelstein, M.D.
Steffie Woolhandler, M.D.
(617) 497-1268
(617) 665-1032
(617) 546-0615 (Beeper)

Government Funds 60% of U.S. Healthcare Costs - Far Higher than Previously Believed

Harvard Study Shows Government Health Spending in U.S. Exceeds Costs in any Nation With National Health Insurance

"We Pay for National Health Insurance but Don't Get It"

Government expenditures accounted for 59.8% of total U.S. health care costs in 1999, according to a Harvard Medical School study published today in the journal Health Affairs. At $2,604 per capita, government spending was the highest of any nation - including those with national health insurance. Indeed, government health spending in the U.S. exceeded total health spending (government plus private) in every other country except Switzerland. (Estimated total U.S. health spending for 2002 is $5,427 per capita, with government's share being $3,245.)

Taxes fund care for those most vulnerable to illness and expense - the elderly, the disabled, the poor, patients with end-stage kidney disease, severe mental illness, certain cancers and rare diseases, and now, Alzheimer’s (75.8% of tax-financed health expenditures). Taxes also fund coverage for all public employees, veterans, and the military (e.g. all members of Congress have publicly-funded insurance)(9.1%). And businesses get large tax-breaks for providing coverage to their employees (15.1%).

“We have a system in which we’ve “privatized the profits, and socialized the risks,” said Dr. Steffie Woolhandler, a co-author of the study and Associate Professor of Medicine at Harvard. “Insurance companies reap the profits and pay their executives millions while drowning our health system in paperwork at public expense. For their part, businesses complain bitterly of rising health care costs, yet they pay only 19% of total U.S. health costs, insure the mostly healthy and wealthy, and reap large tax-breaks (subtracting tax-breaks reduces employers share of health spending to just 11%).”

“It would be much better – for both business and the American public - to get employers out of the business of providing health insurance altogether,” continued Dr. Woolhandler. If we put everyone – young and old – healthy and ill – in the same risk pool, we could save enough on bureaucracy ($154 billion) to cover all the 40 million uninsured. We could also end “job-lock” for employees and effectively control rising health costs – something no individual business can do.”

The study analyzed data on spending for Medicare and Medicaid, as well as the costs of tax subsidies for private coverage and expenditures to purchase private insurance for government employees. These latter two categories have previously been overlooked in calculations of government health spending. It found that government's share of expenditures has nearly doubled since 1965, with tax subsidies and public employee benefit costs increasing fastest.

“National health insurance doesn’t mean spending more; it means spending wisely,” said Dr. David Himmelstein, a co-author of the study and co-founder of Physicians for a National Health Program (PNHP). “We spend over $309 billion on paperwork in insurance companies, hospitals, nursing homes and doctor’s offices – at least half of which could be saved through national health insurance. We spend over $150 billion on medications -- at prices 50% higher than Canada’s”.

“Universal coverage is affordable - without a big tax increase,” continued Dr. Himmelstein. “Because taxes already fund 60% of health care costs, a shift about the size of the recent tax cut ($130 billion a year) from private funding to public funding would allow us to cover all the uninsured and improve benefits for everyone else. Insurers/HMOs and drug companies buy-off our politicians with huge campaign contributions and hordes of lobbyists."

“It’s an outrage that the American public is already paying for health care for all with their tax dollars – yet 41 million people are without any health insurance at all. 85% of the uninsured are working people and children,” said Dr. Quentin Young, Past President of the American Public Health Association. “Health care should be every American’s right, just like other tax-funded necessities like roads and defense, police and fire protection.”


Physicians for a National Health Program is an organization of over 9,500 physicians that supports non-profit national health insurance. It has chapters and spokespeople across the country and makes its headquarters in Chicago. For additional contacts, call 312-782-6006.