Who Pays For Health Care In The Us: Uncovering The Costs

How are hospitals funded in America? Hospitals in the United States receive their funding from a combination of public and private sources. Public funding primarily comes from government programs like Medicare and Medicaid, while private funding includes payments from health insurance companies and individuals. To ensure payment for their services, hospitals often utilize a system known as a diagnostic-related group (DRG). Under the DRG system, a predetermined payment amount is assigned to specific medical conditions or sequences of treatments. This method helps hospitals manage their finances and ensures that they receive adequate compensation for the care they provide to patients, regardless of whether they are publicly or privately insured.

As of the latest available data in 2019, the United States government covers almost 50 percent of healthcare expenditures. This significant portion of healthcare spending has been on the rise, primarily due to the transition of the baby boomer generation into Medicare, the government-funded health insurance program for seniors. According to a report from the Centers for Medicare & Medicaid Services (CMS), it is projected that total healthcare spending in the U.S. will exceed $5.9 trillion by 2027. This projected growth indicates that healthcare spending will account for over 19 percent of the nation’s economy. These statistics highlight the substantial role the government plays in funding healthcare in the United States.

Is the United States financially responsible for healthcare through taxes? To shed light on this question, it’s crucial to examine the federal government’s financial commitment to healthcare. In the fiscal year 2019, the federal government allocated a substantial budget, nearly $1.2 trillion, to support various healthcare initiatives. Furthermore, an additional $234 billion was earmarked for healthcare through income tax expenditures. This underscores the substantial investment made by the federal government in healthcare during fiscal year 2019, as outlined in Table 1.