Who pays hospital bills? Analyzing hospitals’ payer mix


Nov. 26 2019, Updated 10:40 p.m. ET

Government programs

Government programs like Medicare and Medicaid, combined with other health insurance plans such as the Children’s Health Insurance Program (or CHIP), Department of Defense, and Department of Veterans Affairs programs, comprise about 51% of the total payments for hospital care. There are also other third-party payers, like worksite healthcare, the Indian Health Service, and workers’ compensation contributing approximately 9% of the total payments. Private health insurance and out-of-pocket payments together comprise 40% of the remaining spending.

Government programs: Medicare, Medicaid, and CHIP

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Medicare is a national social insurance program that provides health insurance to all U.S. citizens aged 65 and older as well as young people with disabilities who receive social security disability insurance (or SSDI). According to the Congressional Budget Office’s “April 2014 Medicare Baseline,” total spending on Medicare in 2013 amounted to $585 billion and spending on hospital inpatient care was $139 billion.

Medicaid is a social healthcare program funding medical and health services for low-income people in the United States. Medicaid finances about 17% of the total hospital care spending in the U.S.

Created in 1997, the Children’s Health Insurance Program (or CHIP) covers uninsured children from families with low incomes but higher-than-required to qualify for Medicaid. This program provides coverage to almost 8 million children.

Private insurance

The “Current Population Survey Annual Social and Economic Supplement” (or CPS ASECs) conducted by the U.S. Census Bureau defines “private health insurance” as a “plan provided through an employer or a union, or purchased by an individual from a private company.”

Out-of-pocket payments

About 3% of the total spending on hospital care is contributed by out-of-pocket payments borne directly by patients.

HCA Holdings (HCA), Tenet HealthCare (THC), Community Health Systems (CYH), LifePoint Hospitals, Inc. (LPNT), and Universal Health Services (UHS) are the five large hospital chains in the U.S that use this payer mix.


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