Most California Health Care Paid For With Public Funds

The illusion in the United States is that the vast majority of healthcare is paid for privately but researchers found that, at least in California, more than two-thirds of healthcare payments are made with public funds.

Between federal and state programs and tax subsidies, about 71 percent of healthcare in California is paid for with public funds, and researchers are questioning whether the winding list of sources is a better way to pay for healthcare than a single-payer system, according to a policy brief published online by the UCLA Center for Health Policy Research.

An analysis by the Centers for Medicare and Medicaid Services estimates 45 percent of national health spending was funded by federal, state and local governments in 2014, most of which is funded through Medicaid, Medicare and programs for low-income children.

Researchers at UCLA say, at least in California, health spending through county public health expenditures, new Affordable Care Act subsidies and tax subsidies for employer-based health insurance drives the proportion of care paid for by the public well beyond the CMS estimate.

"For a majority of Californians, a public-run system is already the reality," Andrea Sorensen, a graduate student at the Fielding School of Public Health at the University of California Los Angeles, said in a press release. "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."

According to researchers, 71 percent of California's $367.5 billion in healthcare bills in 2016, about $260.9 billion, will be paid for using public funds.

The biggest portion of that $260.9 billion comes from the state's Medi-Cal/Health Families program, covering 27 percent of the expenditure, followed by 20 percent from Medicare, and another 12 oercent from tax subsidies for employer sponsored insurance.

Other sources of public funding for healthcare include 4 percent from government spending on public employee insurance, 3 percent from county-level public health programs, 3 percent from the U.S. Veterans Administration and 2 percent from Affordable Care Act subsidies.

The remaining 29 percent of costs in California are covered by employer-sponsored group insurance, enrollee expenses for premiums, out-of-pocket expenses for covered benefits and individually purchased insurance.

When applying their methods to national estimates, the researchers report that California's public spending on healthcare rivals national numbers, suggesting the public funds may pay as much as 65 percent of the country's healthcare bills, as opposed to the 45 percent estimate from CMS.

Considering the numbers show a mostly publicly funded healthcare system already exists -- not exactly the private system many assume it to be -- the researchers suggest policymakers consider whether these funds are being distributed in the best way possible. While they do not endorse a single-payer system in the policy statement, the researchers ask whether single-payer or another alternative would be more cost effective.

"The public sector is the primary player in health care spending," said Gerald Kominski, director of the UCLA Center for Health Policy Research and leader of 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?'"