Geoffrey D. Paulin and Wolf D. Weber
(1995) "The Effects Of Health Insurance Status On Consumer
Spending," Monthly Labor Review, March 1995, 34-54.
Note: This work is substantially abridged. For a complete
version, see Monthly Labor Review, March 1995, pp. 34-54. The
views expressed herein are those of the authors and do not
reflect the policies of the Bureau of Labor Statistics (BLS)
or the views of other BLS staff members.
In 1993, the nation's health care costs rose to $884.2
billion, up 7.8 percent from 1992. As a share of Gross
Domestic Product (GDP), this accounted for 13.9 percent (HHS
1994, p.1) compared to 5.9 percent of GDP in 1965 (NCHS 1993,
p. 161), the year in which the federal government initiated
Medicare and Medicaid.
As health care costs and usage rose, much of the burden of
funding health care shifted to business and government. The
business share of health services and supplies grew from 16
percent in 1965 to 28 percent in 1981, and remained fairly
stable thereafter (Cowan and McDonnell 1993, p. 229). The
federal government's share, however, continued to grow
(12.2 percent average yearly increase for 1989-1993), and in
1993 comprised 31.7 percent of the national health care bill
(HHS 1994, table 1).
Consumer expenditures for health insurance premiums also have
increased recently, probably due, in part, to the shifting of
premium costs from employer to employee. The Consumer
Expenditure Interview Survey (CE) shows that the percentage
of families reporting health insurance expenditures has risen
steadily from 55 percent in 1988 to 61 percent in 1993. The
CE also shows that premiums have increased from 39 percent of
the average family's health care spending in 1988 to 45
percent in 1993. In actual dollars, average premium spending
rose 69 percent over this period.
Jacobs and Shipp (1993) show that as a share of current
consumption, out-of-pocket health care expenditures peaked at
6.7 percent in 1960-61, declined to 5.4 percent in 1972-73,
and rose to 5.7 percent in 1988-89. In 1993, it was 6.9
Rising health care prices, increased usage, changing
demographics, and perennial concerns about government fiscal
austerity continually spark debates over health care funding.
Households, which have avoided much of the burden of the
increase in health care expenditures, are likely to pay a
larger share in the future. It is therefore important to
examine household expenditure patterns to assess the effect
that a transfer of health care costs to consumers may have.
Last Modified Date: July 19, 2008