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1992.02.27 :  Health Care Expenditure Data

Contact:   Bob Hardy  (202) 245-6145 
February 27, 1992

        HHS Secretary Louis W. Sullivan, M.D., today released a
report on health expenditures in 1990 by households, business and
government. 
        The nation spent a total of $643.4 billion on health
services and supplies in 1990, a 10.5 percent increase over 1989. 
For the third consecutive year, health care spending, excluding
research and construction, increased at double-digit rates.  
        The spending report, "Business, households and governments:
Health care costs, 1990," is published in the winter edition of
Health Care Financing Review, a quarterly journal of the Health
Care Financing Administration.
        Households accounted for the largest share of the spending
at $224.7 billion, a 6.8 percent increase from 1989.  The American
families' principal health payments were for out-of-pocket
expenses, including services not covered by insurance, and
copayments and deductibles required by insurers.
        In 1990, federal, state and local government had health
care expenditures of $212.9 billion, while business spent $186.2
billion. 
        The federal government's health spending as a share of
federal revenues rose from 3.5 percent in 1965 to 17.2 percent in
1990, up from 15.2 percent in 1989.  For state and local
governments, the share of their revenues increased from 7.5 percent
to 16.3 percent between 1965 and 1990.  Government contributions to
Medicare and Medicaid, through general revenues, accounted for more
than half of public spending, the report says.  Medicaid
expenditures, jointly funded by federal and state governments, rose
from $62.3 billion in 1989 to $75.2 billion in 1990.
        Among businesses, about three of every four dollars, or
$139.1 billion of $186.2 billion, was spent on premiums for
employee health insurance, a 10.6 percent increase over 1989.  The
premiums provided coverage to 140.4 million workers and their
dependents, and another 11.4 million non-workers and their
dependents.  Business also paid $29.7 billion for contributions to
the Medicare hospital insurance trust fund, as part of employer-
paid Federal Income Compensation Act taxes.

        The pressure of rising health care costs has been building
on business and government for several decades, but for households
"increasing health care cost burdens are only beginning to be
felt," the report states.

        Household health care spending, as a proportion of adjusted
personal income, remained unchanged at about 4 percent from 1965
until 1980, then grew slightly, reaching 5 percent in 1990.

        Households spent $136.1 billion in 1990 to purchase
services not covered by insurance or paid for the deductible and
coinsurance amounts of covered service required by third parties.
An additional $42.6 billion went for health insurance premiums.

        Households had accounted for 61 percent of health care
spending in 1965, the public sector 21 percent and business 17
percent. By 1990, the breakdown had changed so that expenditures 
for households dropped to 35 percent, and public and business
spending on health care had risen to 33 percent and 29 percent,
respectively.

        In the past quarter century, employer-sponsored insurance
plans have reallocated health care expenses from the household to
private and public employers, the report states.  Moreover, the
cost of health care funded by employers has nearly tripled in the
past decade from $64.8 billion in 1980.

        Health spending by business in 1990 accounted for 45.5
percent of fringe benefits, compared with 22.4 percent in 1965. 
This spending in 1990 equaled 61.1 percent of corporate profits
before taxes and was 8 percent greater than the amount of corporate
profits after taxes.
     

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