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1993.06.24 :  Report -- Business, Households and Governments

Contact:  Anne Verano                    Thursday, June 24, 1993
(202) 690-6145

       A report on health spending released today by HHS Secretary
Donna E. Shalala shows that the burden of paying the nation's
health bills has shifted dramatically in recent years from
businesses toward government. 

       The report, "Business, Households and Governments -- Health
Spending, 1991," finds that health care expenditures rose to more
than 20 percent of government revenues in 1991, and that all levels
of government face rising burdens of health care costs.  The study
was prepared by the Health Care Financing Administration.

       "This study underlines the need for health care reform to
help control spiraling costs for all of us, and to permit deficit
reduction and economic growth," Secretary Shalala said.  "These
costs have thrust government to the forefront of health care reform
efforts."

       Government health expenditures grew 17.9 percent in 1991 to
$254.5 billion, exceeding household spending (at $247 billion) for
the first time.  The Medicaid program was responsible for 65
percent of the 1991 increase.

       Overall expenditures for health services and supplies for
businesses, households, and federal, state and local government,
excluding spending for research and construction, reached $728.6
billion in 1991, an 11.7 percent increase over the total of $652.4
billion in 1990.

       In private industry, spending for employee health care
increased by 9.3 percent in 1991 to $205.4 billion.

       Bruce C. Vladeck, newly appointed HCFA administrator, said,
"Health care reform is necessary to control the increasingly heavy
burden of health care costs placed on business and government, and
thus help stimulate economic expansion."     

       Private and public employers contributed about three of
every four health insurance premium dollars, or $192.2 billion, to
pay for health insurance coverage in 1991, up from two of every
four premium dollars in 1965.  Private business paid $152.7
billion, or 63 percent of total premiums in 
1991.

       The study explains that the willingness of private employers
to pay a larger share of health insurance premiums stems from "the
preferential tax treatments of employer benefits, the ability to
substitute higher benefit increases for lower wages, as well as
employees desire to maintain or enhance benefits."

       The HCFA study reveals U.S. households have managed, for the
most part, to avoid paying a larger share of health care costs.

       During the eight years ending in 1991, consumers
consistently paid about 5 percent of after-tax income for out-of-
pocket health expenses and health insurance premiums.

       The report, written by HCFA researchers Cathy A. Cowan and
Patricia A. McDonnell, will appear in the Health Care Financing
Review.

                                ###