Government Spending on Uncompensated Care is Less Than One Half of One Percent of Government Health Spending

One of the reasons given for universal health insurance coverage is that uninsured people receive medical care but do not pay their bills. It’s true: A new analysis published by the Kaiser Family Foundation estimates that providers delivered $84.9 billion worth of medical care to uninsured people, for which they were not directly paid. However, federal, state, and local governments compensated providers $35.9 billion, leaving $49.0 billion truly uncompensated.

health-care-costsIs that a lot? Well, all levels of government spent $1.3 trillion on health care that year. So, government funding of uncompensated care is 0.4 percent of all government health care spending. If government stepped up and compensated the remaining $49.0 billion, the total payout would amount to about one percent of all government health spending.

Is this really something we should be turning ourselves inside out over? Especially given the evidence that Medicaid does not give timely access to care, and the emerging signals that ObamaCare reduces timely access to care, it is far from clear that adding ObamaCare’s insurance bureaucracy on top of this situation is going to be worth the trouble, even for the beneficiaries.

Also interesting is how governments divide the pie: 62 percent ($32.8 billion) of the $35.9 billion is federal funds, versus 37 percent ($19.8 billion) state and local funds. (There is a small share of charitable contributions, as well.) What if those proportions were flipped around? If state and local governments carried most of the cost, and the federal government served only as a backstop? I’d bet the effectiveness, efficiency, and governance of compensating care for uninsured patients would improve dramatically.

Comments (6)

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  1. Devon Herrick says:

    Free riders and uncompensated care is often the excuse given for needing both individual/employer mandates. The problem with a mandate is someone necessarily has to decide what is “good enough” to satisfy the mandate. Mandates invite special interests to hire lobbyists to intercede on their behalf — convincing states legislators to mandate a specific service, treatment or type of coverage.

    Bottom line: mandating that people buy coverage more comprehensive than they otherwise would purchase likely raises costs more than the one-half of one percent that uncompensated care costs.

    • SManley says:

      This is so insightful, especially in light of the now-apparent propaganda put forth by this administration. From the number of new people this law would insure, to the CBO costs, to the promise of “if you like your doctor, you can keep your doctor,” to this overblown excuse regarding paying for uncompensated medical bills of the uninsured, this president and administration have repeated sold a bunch of lies to the public. In this case, the new problems created by the ACA are 100 times worse than the problem of uncompensated care.

  2. Dale says:

    I have a feeling there were other incentives from the bureaucracy to create these insurance mandates other than to cover 1% of health spending.

  3. Bob Hertz says:

    State and local governments used to carry much of the burden of uncompensated acute care, through about 1980 in most places. This was done primarily through county hospitals.

    Well, whenever a local government saw an opportunity to get out of operating its public hospital, they ran and did not walk toward doing that. In many cases they relieved a big strain on their budgets. Also, some hospital entrepreneurs were only too glad to take over the old public hospitals,and charge market rates to persons with insurance. I think that Bill Frist’s family was involved but am not sure.

    Anyways, on this one John I think the train has left the station.

  4. Mike Sierra says:

    $49 billion is 4% of 1.3 trillion, not 0.4%.

  5. Big truck joe says:

    Isn’t this exactly why hospitals charge $9 per Tylenol pill? Given EMTALA laws, hospitals can’t turn anyone away and given that $49 billion of services are un-reimbursed, they have to make their money somewhere. At Martin Memorial hospital in Stuart FL, they were stuck caring for a comatose uninsured illegal immigrant for years who they were ultimately sued by. And do you think the uncompensated situation will get any better when another 10 million uninsured illegal immigrants join the 30 million already here if Obama has his way? Face it – the UNited States glory days are behind us with the Democrats unsustainable cradle to grave coverage for any one who shows up in our beloved country getting a total free ride. Third world county here we come!