NCPA - National Center for Policy Analysis

Government Share of Health Care Spending at Record High

September 10, 2014

In 2014, government spending -- at the federal, state and local level -- will constitute 46 percent of the country's health care spending. That record portion (costing $1.4 trillion), writes John Merline of Investor's Business Daily, indicates that the government will be responsible for the majority of the country's health spending by 2028.

Ten years ago, the government was paying for 39 percent of all health care spending, but that share has only risen. Obamacare is part of this increase:

  • In 2014 alone, federal health care spending is projected to increase by 14.7 percent, rising faster than the growth of private health care spending for the next decade.
  • With states expanding their Medicaid programs to take advantage of federal funding under the Affordable Care Act, the Centers for Medicare and Medicaid Services (CMS) projects Medicaid spending to rise by 18.4 percent in 2014.

Notably, Obamacare will only further decrease the amount of direct, out-of-pocket health care spending in the country. While consumers paid 48 percent of health care costs out of pocket in 1960, they will pay just 11 percent out of pocket this year. Merline explains that the drop in out-of-pocket spending will only further increase health care inflation by separating consumers from the real costs of their health care.

Nick Gillespie, editor in chief of, explains why government health care policies that separate consumers from the prices of their health care encourage spending: "If we think that we're paying just 10 cents out of pocket or just 54 cents overall for every dollar of health care we're getting, of course we're more likely to purchase more."

Gillespie writes that we must "inject more market signals" into health care in order to curb this health inflation problem.

Source: Nick Gillespie, "Govt Spends Record 46% of Health Care Dollars: Why That's Not Good,", September 8, 2014; John Merline, "Health Care's Big Spender: It's The Government At 46%," Investor's Business Daily, September 5, 2014.


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