Taxpayers Foot 70 Percent Of California’s Health Care Tab, Study Finds

This year, taxpayers will cover about 70 percent of what is spent on health care in California, according to a new analysis released Wednesday by the UCLA Center for Health Policy Research.

Many people assume that the U.S. health care system is primarily supported by private dollars, such as insurance premiums from employer-based coverage, said Gerald Kominski, director of the UCLA Center for Health Policy Research and the study’s lead author.

But that’s no longer the case, at least in California — mostly because of its massive expansion of Medi-Cal, the state’s version of Medicaid, he said.

“There’s this myth that we have a mostly privately funded health care system, but we’re approaching a point in which almost three quarters of this system is funded by public money,” Kominski said. “Now a question to ask ourselves is: when do we reach the tipping point and say ‘this is essentially a public system?’”

Of $367 billion estimated to be spent on health care in the state in 2016, $260 billion will be from taxpayer money, according to the research.

Nationwide, public funds paid for about 45 percent of the country’s $3 trillion in health care expenditures in 2014 through public insurance programs such as Medicaid, Medicare and programs for low-income children, according to federal data. But that estimate may be too low — it’s probably closer to 65 percent as suggested in a separate national study, according to Kominski.

In California, Medicare and Medi-Cal alone account for roughly 47 percent of health care expenditures.

“In California we’ve had a much larger Medi-Cal expansion than anyone expected,” he said, noting that almost one-third of the state’s population is covered by the health program for low-income people.

Researchers were surprised, however, to see how big a role was played by county health programs that often serve indigent populations — $10 billion, or nearly 3 percent of the state’s total health care spending.

The UCLA researchers counted a “hidden” public expenditure that other federal studies do not: tax subsidies for employer-based health insurance, Kominski added. That makes up another 12 percent of the state’s health care spending, the data shows.

Before the Affordable Care Act took effect, it was true that the health care system in California was mostly private, Kominski said.

Maribeth Shannon, a director at the California Health Care Foundation, agreed that the ACA greatly accelerated the shift. (California Healthline is an editorially independent publication of the California Health Care Foundation.)

It used to be that most Americans were covered by their employer. Today, far fewer are, Shannon said.

“It’s a combination of things,” she said. “After the ACA you now have more generous eligibility guidelines for public programs. You also have the factor of an aging population.”

A growing national population of people over 65 will mean higher health care costs.

People 65 and older are generally covered by Medicare.

Because of this new dominance of public spending in health care, the researchers concluded that a single-payer health care system is more feasible than previously believed.

“For a majority of Californians, a public-run system is already the reality,” said Andrea Sorensen, a graduate student at the UCLA Fielding School of Public Health, who co-authored the study.

This story was produced by Kaiser Health News, which publishes California Healthline, a service of the California Health Care Foundation.