Saved by Insurance

While on the subject of health care, here is a bit of fascinating history. I bring three pie charts showing how health care expenditures were funded in 1960, 1980, and 2009—all courtesy of the Centers for Medicare & Medicaid Services, the National Health Expenditure Accounts (link). Clicking on the images enlarges them; Esc returns to the text.

Notice here what happens to the out-of-pocket category—that’s the ordinary person’s cash participation—over time. It goes from nearly half in 1960 to 23 percent in 1980 to 10 percent of total cost in 2009. Notice what happens to private health insurance. Its share increases by just 7 percent in nearly 50 years. So who is it that saves our rears? Why it is the federal sector.

Worth noting here is that in 1960 the federal portion is entirely defense related, Department of Defense and Veterans Affairs. By 1980 (but beginning in 1966), we add Medicare (the elderly) and Medicaid (selected categories of the poor). By 2009 (but beginning in 1998) we add the CHIP programs, thus the Children’s Health Insurance Program. CHIP covers one more layer of poor children, thus those that Medicaid does not reach. This means, in effect, that the poor-with-children, the near-poor children, and the elderly (those who’ve stopped working) are already essentially insured by the Federal Government. Yet that still leaves 49.9 million without any health insurance. These are the poor who don’t qualify for Medicaid.

To sharpen the extent to which the evolution of our mixed insurance system has helped the majority of us, we need to note how total spending on health care has escalated since 1960. That is shown in the following table:

	Total ($ billion)	% of GDP	Per Capita $
1960	27.3	5.2	147
1980	255.7	9.2	1,110
2009	2486.3	17.6	8,086

Thus out-of-pocket spending, while decreasing from 48 percent in 1960 to 10 percent in 2009 still managed to increase 23-fold in this period. Saved by insurance—even if, to be sure, we still pay the costs of it in various forms—as taxes, premiums, or as lower wages.