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National Information Center on Health Services Research and Health Care Technology (NICHSR)

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Health Economics Logo

Health Economics Information Resources: A Self-Study Course

Module 2 - Sources and Characteristics of Information Relating to Health Care Financing in the US

Public funding

Turning our attention to public funding – we can see that the breakdown of expenditures from public sources for the year 2000 is as follows: Medicare 17%; Medicaid and State Children’s Health Program 16%; Other Public 12%.

Medicare

Medicare is one of the more familiar programs to Americans. This federal program provides a range of medical care benefits for persons aged 65 and over, disabled persons and their dependents and those suffering from chronic kidney disease. Medicare covers about 95% of our nation’s aged population, approximately 39 million in 2000. Traditionally, there have been 2 parts to the program.

Part A is financed by payroll taxes collected under the Social Security System and provides hospital care, extended facility care, and some home care.

Part B is a voluntary supplemental program that covers physician’s expenses and is supported by general tax revenue and a small premium from enrollees. Nearly all Medicare beneficiaries automatically covered by Part A join Part B as well.

There is a newer, third part of Medicare – sometimes known as Part C, established in 1997. It has an expanded set of options for the delivery of health care under Medicare, allowing beneficiaries to participate in eligible HMOs, PSOs, PPOs and other coordinated care plans.

Sources of payment for Medicare...

Sources of Payment

Medicare pays more than half the total cost of beneficiaries' medical care.

However, Medicare is not comprehensive; there are deductibles, co-insurance fees, and serious gaps in coverage.

Seniors with Medicare coverage are still responsible for many out-of-pocket expenses – most notably, and most currently newsworthy, prescription drugs and long-term care. They are the ones we have been hearing the most about in recent years.

Medicaid and SCHIP

Medicaid is a program funded jointly by federal and state governments and, in reality, encompasses 50 different state programs grouped together under this common name and bound together by some general requirements. Medicaid helps low income persons and covers about 36 million individuals. Eligibility for Medicaid is determined by the states themselves within federal guidelines, which include major types of care required to be covered.

Created by the Balanced Budget Act of 1997, the State Children’s Health Insurance Program (SCHIP) is a largely federally funded Medicaid program designed to help states expand health insurance to children whose families earn too much for traditional Medicaid but not enough to afford private health insurance. In 2000, 3.3 million of the nation’s approximately 11 million otherwise uninsured children were covered by SCHIP. Due primarily to increased flexibility and expanded marketing, that amount was increased by 38% in 2001, resulting in 4.6 million children covered.

Other Public

“Other Public” includes programs such as workers compensation, public health activity, Department of Defense, Department of Veterans Affairs, Indian Health Service and State and local government hospital subsidy and school health. These programs provided 12% of the total health dollars for the nation in 2000.

Public funding has generally increased over the long term from roughly 25% in 1960 to 45.2% in 2000. This increase, especially since 1965, is largely a result of greater federal expenditures and much significant rise in federal spending is accounted for by the Medicare and Medicaid Programs.

The trend here is the reverse of that for private funding.

 

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