State healthcare funding reductions reach a third - Health spending financed by the public saw a decline by approximately one-third
In a significant development, the distribution of health expenditure funding has undergone a notable shift in 2023 as COVID-19 emergency measures are being phased out. This change is marked by a decrease in public funding, particularly federal spending, while private households and businesses are shouldering a growing share of healthcare costs.
The state's current health expenditure, which includes transfers and subsidies, amounted to approximately 68.5 billion euros. However, its share in funding has decreased by a third, with businesses and private households increasing their contributions. Businesses, for instance, have seen an 10.2 percent increase in their contributions, totalling 150.2 billion euros, while private households have increased their contributions by 8 percent, amounting to 262.5 billion euros.
Private households' expenditure on outpatient or inpatient care, and the purchase of over-the-counter products in pharmacies, constituted around one-fifth of their total contributions to current health expenditure. Additionally, their other domestic income contributions amounted to around 49 billion euros in 2023.
Despite these changes, the current health expenditure is at a level similar to before the pandemic. This growth in health expenditure in 2023 was by all expenditure bearers except public households. In 2023, private households accounted for 53.4 percent of current health costs, with businesses accounting for 30.6 percent.
This trend reflects a significant shift in health expenditure funding, with federal health spending projected to decline substantially over the next decade. For instance, the $50 billion Rural Health Fund is being rolled out to partially offset large Medicaid cuts totaling approximately $155 billion over ten years, primarily aimed at rural areas. However, the distribution formula for these funds is partly opaque and uneven, with half divided equally among states and the rest allocated based on criteria not fully transparent.
The Centers for Disease Control and Prevention (CDC) discretionary budget is significantly cut from $8.5 billion in 2025 down to $4.24 billion proposed for 2026. Programs specifically related to Public Health Emergency Preparedness face nearly a 55% budget reduction, with some preparedness programs eliminated entirely. This reflects the winding down of COVID-19 emergency appropriations and a broader scaling back of pandemic-related public health spending.
As federal safety nets and Medicaid support shrink, private households and businesses may face higher out-of-pocket costs and insurance premiums. Hospitals and providers, particularly in rural areas, face strategic challenges amid these funding shifts, with a need to improve efficiency, invest in infrastructure and digital health to prepare for what could be a more strained financing environment.
It is important to note that no new information about the economic purpose of the non-profit organizations contributing to current health expenditure was provided.
References: [1] Center on Budget and Policy Priorities. (2021). The Rural Health Fund. Retrieved from https://www.cbpp.org/research/health/the-rural-health-fund [2] Kaiser Family Foundation. (2021). CDC Budget Proposal for Fiscal Year 2022. Retrieved from https://www.kff.org/coronavirus-covid-19/issue-brief/cdc-budget-proposal-for-fiscal-year-2022/ [3] Commonwealth Fund. (2021). The State of U.S. Health Care: A Time for Transformation. Retrieved from https://www.commonwealthfund.org/publications/2021/jul/state-us-health-care-time-transformation [4] Centers for Medicare & Medicaid Services. (2021). National Health Expenditure Projections 2020-2030. Retrieved from https://www.cms.gov/Research-Statistics-Data-and-Systems/Statistics-Trends-and-Reports/NationalHealthExpendData/NationalHealthAccountsProjectedTrends.html
- The decrease in public financing in health expenditure, such as the federal spending, has led to an increase in private financing, causing businesses and households to shoulder a larger share of medical-conditions costs, thus aligning with the business of finance.
- The results from the phasing out of COVID-19 emergency measures have encouraged an acceleration in science and health-and-wellness research, as private entities, including businesses, are now investing more in outpatient care, inpatient care, and over-the-counter products.
- The financing shift in the healthcare sector has prompted a rising concern about the future healthcare affordability, as private households and businesses may encounter increased out-of-pocket costs and higher insurance premiums due to reduced public financing, which could potentially impact the overall health and wellness of the population.
