December 2002

Employer Spending on Health Care: 1987-2000

Private Business
  • In 2000, private business spent a total of $334.5 billion on health services and supplies, up from $123.3 billion in 1987. Between 1987 and 2000, private business spending on health services and supplies increased at an average annual rate of 8 percent.

  • The major part of private business spending on health services and supplies went to contributions to private health insurance premiums. In 2000, 74 percent of employer spending on health services and supplies, or $246.2 billion, was contributions to private health insurance premiums. This was up from 69 percent, or $85.3 billion, in 1987.

  • Private-sector employees contributed $79.5 billion to employment-based private health insurance premiums in 2000, up from $22.8 billion in 1987.

  • Private-sector employers' contributions to private health insurance premiums represented 75.6 percent of total spending (both employer and employee contributions) on private health insurance premiums. This was down slightly from 78.9 percent in 1987.

  • In 2000, private business contributed $61.4 billion to the Medicare Hospital Insurance (HI) Trust Fund, up from $24.6 billion in 1987. This amount accounted for 18 percent of private business spending on health services and supplies, down from 20 percent in 1987.

  • In 2000, private business spent $22.7 billion on workers' compensation and temporary disability insurance, up from $11.7 billion in 1987. This amount accounted for 7 percent of private business spending on health services and supplies, down from 9 percent in 1987.

State and Local Governments

  • In 2000, state and local governments, as employers, spent a total of $64.2 billion on health services and supplies for their employees, up from $19.5 billion in 1987. Between 1987 and 2000, state and local governments' spending on health services and supplies for their employees increased at an average annual rate of 9.6 percent.

  • The major part of state and local governments' spending, as employers, on health services and supplies for their employees went to contributions to private health insurance premiums. In 2000, 89 percent of state and local government spending, or $56.9 billion, was contributions to private health insurance premiums. This was up from 84 percent, or $16.4 billion, in 1987.

  • State and local government employees contributed $13.4 billion to employment-based private health insurance premiums in 2000, up from $3.5 billion in 1987.

  • State and local governments' contributions to private health insurance premiums were 81.0 percent of total contributions (both employer and employee contributions) to private health insurance premiums, down slightly from 82.5 percent in 1987.

  • In 2000, state and local governments, as employers, contributed $7.3 billion to the Medicare Hospital Insurance (HI) Trust Fund, up from $3.1 billion in 1987. This amount accounted for 11 percent of state and local governments' spending on health services and supplies for their employees, down from 16 percent in 1987.

For more information, contact Ken McDonnell (202) 659-0670.

Source: Cathy A. Cowan, Patricia McDonnell, Katherine R. Levit, and Mark A. Zezza, "Burden of Health Care Costs: Businesses, Households, and Governments, 1987-2000," Health Care Financing Review, Vol. 23, no. 3 (Spring 2002): 131-159.

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