Healthcare Funding in the United States: Things You Wish You Learned in Occupational Therapy School

You probably already know that the US healthcare system spends and burns through a lot of money. But just how is it funded in the first place? Does the president simply just write a check out for $X trillion of dollars? Or is it there that goes more into this? After reading this article, you will learn about how the US healthcare system is financed.

Major Sources

The 4 major sources that are funded are Tricare ($), Medicare ($$$$), Medicaid ($$), and Commercial insurance ($$$). *Dollar signs represent the amount of approximate funding to each entity.

Tricare is for our service members. Medicare is for older adults over aged 65 as well as other special groups, e.g., younger people with disabilities and people with End Stage Renal Disease (ESRD).[1]https://www.hhs.gov/answers/medicare-and-medicaid/who-is-eligible-for-medicare/index.html Medicaid qualification is for those below a threshold for income or some disabled individuals. Commercial (private) insurance such as through your employer is for most Americans not covered by the previous 3 entities.

Tax–Funded Sources: Medicare & Medicaid

Both Medicare and Medicaid are tax-funded federal (not state level) entities. The money that you earn as an employee goes towards these two. Technically, Medicaid is overseen at the state level. For example, in California, Medicaid is actually called Medi-Cal.

In terms of funding, Medicare is primarily financed from payroll taxes, whereas Medicaid is a mix of state and federal taxes.

CHIPS

You may also have heard of CHIPS. CHIPS is Medicare, Medicaid, and the Children’s Health Insurance Program combined.

Commercial Insurance

Commercial insurance can be purchased by an individual person or by a business, such as your employer. Commercial insurance companies can be for-profit or non-profit. For-profit companies must return their profits to stockholders in the company. Nonprofit companies also intend to make a profit, but these profits must be retained by the organization to support its growth. Examples of commercial insurance are Blue Cross and Aetna.

Percentages

Considering these dollar signs, what percentage of US spending goes towards these programs? Overall health spending comprises approximately 63% in 2013 and is projected to be 67% in 2024. In contrast, Canada has national health insurance and it is approximately 70% tax-funded.[2]Himmelstein, D., & Woolhandler, S. (2016). The current and projected taxpayer shares of U.S. health costs. American Journal of Public Health, 106, 449–452. https://doi … Reference List

Here is some real data from 2019 – the numbers are percentages[3] … Reference List

Location Employer Medicaid Medicare Military Uninsured
United States 0.496 0.198 0.142 0.014 0.092
Alabama 0.472 0.195 0.160 0.021 0.097
Alaska 0.484 0.213 0.100 0.053 0.115
Arizona 0.451 0.210 0.161 0.015 0.111
Arkansas 0.420 0.262 0.159 0.014 0.091
California 0.480 0.253 0.114 0.009 0.078
Colorado 0.534 0.168 0.128 0.023 0.078
Connecticut 0.529 0.215 0.141 0.007 0.059
Delaware 0.497 0.204 0.173 0.018 0.066
District of Columbia 0.549 0.255 0.082 0.013 0.036
Florida 0.403 0.174 0.180 0.017 0.131
Georgia 0.489 0.173 0.126 0.022 0.134
Hawaii 0.543 0.176 0.159 0.040 0.041
Idaho 0.490 0.156 0.150 0.014 0.105
Illinois 0.546 0.182 0.141 0.007 0.073
Indiana 0.533 0.177 0.148 0.010 0.088
Iowa 0.544 0.195 0.156 0.009 0.047
Kansas 0.543 0.139 0.150 0.020 0.092
Kentucky 0.470 0.255 0.158 0.014 0.064
Louisiana 0.418 0.293 0.137 0.014 0.089
Maine 0.465 0.200 0.183 0.015 0.081
Maryland 0.547 0.187 0.133 0.019 0.059
Massachusetts 0.559 0.221 0.131 0.005 0.030
Michigan 0.509 0.217 0.159 0.006 0.058
Minnesota 0.578 0.169 0.147 0.007 0.048
Mississippi 0.422 0.242 0.142 0.018 0.129
Missouri 0.520 0.144 0.164 0.013 0.101
Montana 0.430 0.208 0.181 0.018 0.083
Nebraska 0.568 0.126 0.142 0.016 0.079
Nevada 0.495 0.178 0.140 0.017 0.115
New Hampshire 0.562 0.132 0.177 0.012 0.064
New Jersey 0.557 0.166 0.138 0.005 0.079
New Mexico 0.366 0.327 0.150 0.018 0.098
New York 0.498 0.257 0.130 0.004 0.053
North Carolina 0.463 0.179 0.153 0.024 0.114
North Dakota 0.557 0.122 0.138 0.021 0.074
Ohio 0.526 0.200 0.159 0.008 0.067
Oklahoma 0.455 0.170 0.151 0.020 0.149
Oregon 0.493 0.208 0.162 0.009 0.071
Pennsylvania 0.518 0.202 0.163 0.008 0.057
Rhode Island 0.540 0.205 0.146 0.008 0.043
South Carolina 0.454 0.188 0.168 0.022 0.108
South Dakota 0.515 0.128 0.161 0.018 0.096
Tennessee 0.478 0.195 0.150 0.018 0.102
Texas 0.476 0.159 0.109 0.016 0.184
Utah 0.605 0.093 0.100 0.012 0.096
Vermont 0.484 0.239 0.175 0.010 0.044
Virginia 0.541 0.135 0.148 0.044 0.080
Washington 0.529 0.198 0.139 0.018 0.066
West Virginia 0.440 0.266 0.190 0.013 0.066
Wisconsin 0.565 0.161 0.155 0.008 0.058
Wyoming 0.511 0.115 0.162 0.018 0.123
Puerto Rico 0.236 0.460 0.141 0.005 0.078

 

Implications for Practice

Why should you bother with learning how healthcare is funding in the US? For one, it affects you as you likely will fall under one of these categories for insurance. As a student, you may qualify for Medicaid. When you enter the workforce, you’ll likely be covered commercial insurance. And when you turn 65, Medicare. It’s worth noting that it’s possible to have a combination of insurances. For example, some older adults may have Medicare + Medicaid = Medi-Medi or Medicare + Commercial. Medicare usually is utilized first before commercial and this can make things more convoluted for the insured person, the occupational therapist, and the rehab team.

Then there’s insurance for your patients. We’ll talk about this next time!

References

References
1 https://www.hhs.gov/answers/medicare-and-medicaid/who-is-eligible-for-medicare/index.html
2 Himmelstein, D., & Woolhandler, S. (2016). The current and projected taxpayer shares of U.S. health costs. American Journal of Public Health, 106, 449–452. https://doi .org/10.2105/AJPH.2015.302997
3 https://www.kff.org/other/state-indicator/total-population/?dataView=0&currentTimeframe=0&selectedDistributions=employer–medicaid–medicare–military–uninsured&sortModel=%7B%22colId%22:%22Location%22,%22sort%22:%22asc%22%7D
Jeff is a licensed occupational therapist and lead content creator for OT Dude. He covers all things occupational therapy as well as other topics including healthcare, wellness, mental health, technology, science, sociology, and philosophy. Buy me a Coffee on Venmo.