U.S. Government Spending on Healthcare

Another interesting angle from which to see the cost ineffectiveness of our health system is to look at the amount of money our government spends on health care despite the fact that it does not provide universal health coverage, as the government does in every other First World country.

Direct U.S. government (federal and state) spending on health care totaled roughly $840 billion (40% of $2.1 trillion) in 2006. See http://www.cms.hhs.gov/NationalHealthExpendData/25_NHE_Fact_Sheet.asp#TopOfPage. Additionally, employer contributions to employee health insurance premiums are not includable in employee taxable income (even though such contributions obviously constitute compensation and thus income under IRC § 61). So the federal government loses an additional ~$131 billion per year (2006). (I do not have a citation on this but I am taking it on the authority of a chart prepared by my former tax professor). $840 billion plus $131 billion = $971 billion. This figure represents ~7.36% of U.S. GDP for 2006, which was about $13.2 trillion. By comparison, Canada spends 7.47% (69.8% of 10.7%) of its GDP on its national health system. Put another way, the U.S. government spends roughly $3,200 per person on healthcare, while the Canadian government spends about $2,990 (USD) per person on its national healthcare system.

Remember that, by all accounts, Canada has the better system. See http://www.who.int/whr/2000/en/whr00_annex_en.pdf, p. 13. So we are paying for a decent universal health care system, but we aren’t getting it.

Note: this is not a true comparison of “apples to apples” because I do not include the amount of money Canada spends on tax subsidies to private employers that provide health insurance to their employees. I know they provide some such subsidy, but that it’s not nearly as generous as it is here. Anyway, my point was not to compare overall spending levels but to compare what our government spends to what a government has to spend in order to have a functional single payer system. To put it another way, my point is to highlight what we could buy with current government spending levels.