UCLA Center for Health Policy Research
Health Policy Brief
Public Funds Account for Over 70 Percent of Health Care Spending in California
By Andrea Sorensen, Narissa J. Nonzee, and Gerald F. Kominski
In California, personal health care expenditures are estimated to total more than $367 billion in 2016. Approximately 71 percent of these expenditures will be paid for with public funds (i.e., taxpayer dollars). This estimated contribution of public funds to health care expenditures is much higher than estimates that include only major health insurance programs such as Medicare and Medicaid. Several additional public funding sources also contribute to health care expenditures in the state, including government spending for public employee health benefits, tax subsidies for employer-sponsored insurance and the Affordable Care Act (ACA) insurance exchange, and county health care expenditures. As health care reform continues to take effect, it will be important to monitor the public versus private contributions to state health care expenditures to ensure that funds are being distributed both efficiently and equitably.
Health Care Expenditures in California
In California, health care expenditures in 2016 are estimated to total more than $367 billion; our estimates suggest that 71 percent of these expenditures will be paid for with public funds. Medi-Cal/Healthy Families will comprise the largest proportion of total spending (27 percent), followed by Medicare (20 percent). Tax subsidies for ESI (12 percent); government spending for public employee insurance (4 percent); county health expenditures (3 percent); other government programs—Veterans Affairs (VA) health care, Indian Health Services, and Maternal and Child Health (3 percent altogether); and ACA marketplace exchange subsidies (2 percent) will account for the remainder of total expenditures. Private expenditures for covered benefits will comprise approximately 29 percent of total health care spending in California in 2016. These expenditures include employer share of premiums (16 percent), employee share of premiums (6 percent), out-of-pocket expenditures for covered benefits (4 percent), and premium contributions for individually purchased insurance (3 percent).
Conclusion and Recommendations
Public funds in California contribute to approximately 71 percent of total state health care expenditures. As an increasing number of individuals gain health insurance coverage under the ACA, as health care expenditure growth rates continue to increase, and as policy debates continue to mount around introducing a public insurance option, it is important that public funding for health care expenditures be monitored. Comparable to national-level analyses, these findings run contrary to the assumption that U.S. health care expenditures are funded primarily by private payers. If public funds continue to comprise the majority of total health care expenditures, it will be increasingly important for policymakers to consider whether these public funds are being distributed efficiently and effectively, and whether alternatives such as a state single-payer system would be a more effective use of public and private health spending.
UCLA Center for Health Policy Research
August 31, 2016
Public money accounts for more than two-thirds of health care spending in California
By Gwendolyn Driscoll
Contrary to the notion that the country's health care is primarily a privately funded system, 71 percent of health care expenditures in California are paid for with public funds, according to a new analysis by the UCLA Center for Health Policy Research.
In California, public funds will pay for 71 percent ($260.9 billion) of a projected $367.5 billion spent on health care in 2016, according to the study.
"The public sector is the primary player in health care spending," said Gerald Kominski, director of the UCLA Center for Health Policy Research who led the study. "But monies are disbursed in a fragmented way through numerous different entities, each of which has their own system and way of doing things. The question for policy makers is, 'does this fragmented approach make sense?'"
"For a majority of Californians, a public-run system is already the reality," said Andrea Sorensen, a graduate student at the UCLA Fielding School of Public Health, who co-authored the study. "A single-payer system could unite all these various programs and expand them to the entire population, resulting in a more streamlined and cost-effective approach to health care spending."
David Himmelstein and Steffie Woolhandler on the national taxpayer share of health costs:
Comment by Don McCanne
Over two-thirds of health care in California - 71 percent - is paid for by the government, using our taxes. That is even greater than the national taxpayer share of health care - 64 percent (increasing to 67 percent in 2024) - as demonstrated by Himmelstein and Woolhandler.
As Himmelstein and Woolhandler have stated previously, U.S. taxpayers are already paying for a national health program, but not getting it. And that is even more true for Californians.
California has previously made efforts to adopt a single payer program, but they have failed - in the election booth, in the state legislature, and on the governor's desk. As we continue to shift more of health care costs to the government, we have brought along our terribly wasteful, fragmented health care financing system. The California taxpayers are getting a bad deal, and a very expensive one at that ($261 billion for 2016 in public spending alone).
Without enabling federal legislation, states are limited in how close they can come to a much more efficient single payer system, but that does not mean that we should not proceed with whatever is possible now.
California, and every other state for that matter, should do two things simultaneously: 1) Advocate vigorously for a national single payer program - an improved Medicare for all, and 2) Move forward on a state level with improving the health care financing system so that eventual transition to a national program will be that much simpler, not to mention providing some limited interim relief.