Options for Financing Health Coverage Expansion

The present U.S. health care system is financed by a mix of revenue sources. Employer-sponsored group health coverage is funded by employer and employee premium payments, supplemented by tax subsidies. Households pay out-of-pocket for some services and pay premiums either as employees or as individuals. Government programs are supported by general revenues and payroll taxes. And all three groups indirectly share in one way or another in paying the costs of the safety-net systems and charity care that support health care for the uninsured. Anyone proposing major reforms to extend health insurance coverage to the millions of Americans who are uninsured will have to decide whether to use existing financing sources, add new ones, or substitute one single source for the diverse array of funding streams under the current system. This paper develops a framework for describing and assessing the alternative ways to finance health coverage for the uninsured.