How Much Is Health Care Costing You In Taxes?

Cost. So much of the current national conversation about health care comes down to costs. Of course, the sheer magnitude of our system combined with the vast array of interests involved in it make the question of health care cost a veritable Gordian Knot.

It is this economic complexity that made me sit up and take notice when I ran across the recent article in Dollars and Sense: The Magazine of Economic Justice penned by Joel A. Harrison, PhD, MPH. In it, he presents a case for the "hidden costs" of American health care. Dr. Harrison takes us on a tour of where the money is generated and where it goes, as well as with what effect.

From the section titled "Paying Through The Taxman":

The U.S. health care system is typically characterized as a largely private-sector system, so it may come as a surprise that more than 60% of the $2 trillion annual U.S. health care bill is paid through taxes, according to a 2002 analysis published in Health Affairs by Harvard Medical School associate professors Steffie Woolhandler and David Himmelstein. Tax dollars pay for Medicare and Medicaid, for the Veterans Administration and the Indian Health Service. Tax dollars pay for health coverage for federal, state, and municipal government employees and their families, as well as for many employees of private companies working on government contracts. Less visible but no less important, the tax deduction for employer-paid health insurance, along with other health care-related tax deductions, also represents a form of government spending on health care. It makes little difference whether the government gives taxpayers (or their employers) a deduction for their health care spending, on the one hand, or collects their taxes then pays for their health care, either directly or via a voucher, on the other. Moreover, tax dollars also pay for critical elements of the health care system apart from direct care—Medicare funds much of the expensive equipment hospitals use, for instance, along with all medical residencies. All told, then, tax dollars already pay for at least $1.2 trillion in annual U.S. health care expenses. Since federal, state, and local governments collected approximately $3.5 trillion in taxes of all kinds—income, sales, property, corporate—in 2006, that means that more than one third of the aggregate tax revenues collected in the United States that year went to pay for health care.

While it seems that everyone is aware of the costs of care, this examination of the ebb and flow of dollar signs is quite illuminating. Even for those who find economics to be a rather dry and dusty subject, this should make for gripping reading. As we move towards redeveloping our domestic health care, an understanding of these patterns and forces is essential to making an informed decision.

Four main sections make up Dr. Harrison's article:

• Paying Through The Taxman
• Where Does All The Money Go?
• More Taxpayer Dollars, Less Medical Research
• Getting What We've Already Paid For

As you can see, these are all topics that address basic underpinnings of our broken system. An understanding of the flow of revenue is data that can only help, after all in order to fix a problem the first step is identifying it. The discourse surrounding the Presidential Election has already determined that Americans are well aware of the breakdown, now it is time to move from the macro to the micro and look at the details.

Dr. Harrison's full article (with a large amount of documentation) may be found in the "sources" listed below.

SOURCE: "Paying More, Getting Less" 06/24/08
photo courtesy of Paul Keleher, used under its Creative Commons license