The Increasing Cost of Health Care - Who Pays The Bill?

In general, the government is the fastest-growing payer of health care expenses. From 1990 to 2002, total public share of the nation's total health care bill rose from 40.6% to 45.9%. (See Table 5.3.) This represented the largest increase in the government's contribution to health care since Medicare began covering the disabled population in the early 1970s.

TABLE 5.2

Consumer Price Index and average annual percent change for all items, selected items, and medical care costs, selected years 1960–2002
[Data are based on reporting by samples of providers and other retail outlets]
Items and medical care components	1960	1970	1980	1990	1995	1999	2000	2001	2002
	Consumer Price Index (CPI)
All items	29.6	38.8	82.4	130.7	152.4	166.6	172.2	177.1	179.9
All items excluding medical care	30.2	39.2	82.8	128.8	148.6	162.0	167.3	171.9	174.3
All services	24.1	35.0	77.9	139.2	168.7	188.8	195.3	203.4	209.8
Food	30.0	39.2	86.8	132.4	148.4	164.1	167.8	173.1	176.2
Apparel	45.7	59.2	90.9	124.1	132.0	131.3	129.6	127.3	124.0
Housing	—	36.4	81.1	128.5	148.5	163.9	169.6	176.4	180.3
Energy	22.4	25.5	86.0	102.1	105.2	106.6	124.6	129.3	121.7
Medical care	22.3	34.0	74.9	162.8	220.5	250.6	260.8	272.8	285.6
Components of medical care
Medical care services	19.5	32.3	74.8	162.7	224.2	255.1	266.0	278.8	292.9
Professional services	—	37.0	77.9	156.1	201.0	229.2	237.7	246.5	253.9
Physicians' services	21.9	34.5	76.5	160.8	208.8	236.0	244.7	253.6	260.6
Dental services	27.0	39.2	78.9	155.8	206.8	247.2	258.5	269.0	281.0
Eye glasses and eye care1	—	—	—	117.3	137.0	145.5	149.7	154.5	155.5
Services by other medical professionals1	—	—	—	120.2	143.9	158.7	161.9	167.3	171.8
Hospital and related services	—	—	69.2	178.0	257.8	299.5	317.3	338.3	367.8
Hospital services2	—	—	—	—	—	109.3	115.9	123.6	134.7
Inpatient hospital services2	—	—	—	—	—	107.9	113.8	121.0	131.2
Outpatient hospital services1	—	—	—	138.7	204.6	246.0	263.8	281.1	309.8
Hospital rooms	9.3	23.6	68.0	175.4	251.2	—	—	—	—
Other inpatient services1	—	—	—	142.7	206.8	—	—	—	—
Nursing homes and adult day care	—	—	—	—	—	111.6	117.0	121.8	127.9
Medical care commodities	46.9	46.5	75.4	163.4	204.5	230.7	238.1	247.6	256.4
Prescription drugs and medical supplies	54.0	47.4	72.5	181.7	235.0	273.4	285.4	300.9	316.5
Nonprescription drugs and medical supplies1	—	—	—	120.6	140.5	148.5	149.5	150.6	150.4
Internal and respiratory over-the-counter drugs	—	42.3	74.9	145.9	167.0	175.9	176.9	178.9	178.8
Nonprescription medical equipment and supplies	—	—	79.2	138.0	166.3	176.7	178.1	178.2	177.5
	Average annual percent change from previous year shown
All items	…	2.7	7.8	4.7	3.1	2.3	3.4	2.8	1.6
All items excluding medical care	…	2.6	7.8	4.5	2.9	2.2	3.3	2.7	1.4
All services	…	3.8	8.3	6.0	3.9	2.9	3.4	4.1	3.1
Food	…	2.7	8.3	4.3	2.3	2.5	2.3	3.2	1.8
Apparel	…	2.6	4.4	3.2	1.2	−0.1	−1.3	−1.8	−2.6
Housing	…	—	8.3	4.7	2.9	2.5	3.5	4.0	2.2
Energy	…	1.3	12.9	1.7	0.6	0.3	16.9	3.8	−5.9
Medical care	…	4.3	8.2	8.1	6.3	3.3	4.1	4.6	4.7

In 2002 private health insurance, the major nongovernment payer of health care costs, paid approximately 35.4% of all health expenditures, a proportion that has not changed significantly since 1990. The share of health care spending from private, out-of-pocket (paid by the patient) funds declined from 1990 to 2002, from nearly 20% to 13.7%. (See Table 5.3.)

Different sectors paid more for different types of health services. In 2002 the public sector paid for more than half (59%) of all hospital costs, with the federal government providing 47.2% of the nation's hospital bill. The public sector also paid 64% of all nursing home care and 60.6% of all home health care. Private health insurance paid for 49.1% of all physicians' services and 49.5% of dental bills. Patients paid 43.9% of their dental bills and 29.9% of their drug and prescription bills out-of-pocket. (See Table 5.6.)

The Personal Health Care Bill

Much of the increase in government spending has occurred in the area of personal health care. In 1980 government sources paid 40.3% of personal health care expenditures; by 2002 they covered 44.2% ($592.2 billion) of the $1.34 trillion spent on personal health care services. (See Table 5.7.) Of the total expenditures, 33.6% came from the federal government and 10.6% came from state and local governments. A large proportion of the federal increase was attributed to Medicaid spending, which grew from 11.5% of all personal health care expenditures in 1980 to 17.3% in 2002.