Who Pays for Healthcare in the US & Who Should Pay?

Healthcare financing in the United States involves a mix of private and public funding through employers, government programs, and out-of-pocket payments by individuals. But there is ongoing debate around who should bear the costs of healthcare.

This article examines the current US healthcare funding model, its pros and cons, and arguments around who should foot the healthcare bill.

Who Pays for Healthcare Now?

Currently, healthcare in the US is paid for through the following mechanisms:

Employer-Sponsored Health Insurance

  • Covers 49% of Americans
  • Funded through employer and employee contributions
  • Provides group plan rates for employees
  • Average annual premiums are $7,739 for single coverage and $22,221 for family coverage

Medicaid and CHIP

  • Covers 20% of Americans
  • Funded by federal and state governments
  • Provides free or low-cost insurance for low-income groups


  • Covers 18% of Americans
  • Funded by payroll taxes, premiums, and federal budget
  • Provides health coverage for seniors 65+ and certain younger disabled individuals

Individual and Self-Purchased Plans

  • Covers 11% of Americans
  • Funded fully by individuals
  • Includes Obamacare exchange plans, short-term plans, and indemnity plans

Out-of-Pocket Spending

  • Covers all Americans
  • Funded by personal income and savings
  • Includes deductibles, copays, coinsurance, uncovered services

This multi-payer system has evolved over decades into an amalgamation of public and private funding through employment, government plans, individual purchases, and direct payment for care.

Pros of the Current Healthcare Funding Model

America’s hybrid model of healthcare financing has some benefits:

  • Employer plans provide group rate insurance to over 175 million Americans.

  • Government programs like Medicaid, CHIP, and Medicare cover vulnerable sections of society.

  • Individual choice is available for people to buy plans outside of employers.

  • A mixed model allows utilizing both private and public revenue sources.

  • Innovation is encouraged by having private payers in the ecosystem.

  • The free market enables optimal pricing and allocation of healthcare resources.

Cons of the Current Model

However, the current US healthcare financing model also has some drawbacks:

  • High costs: Per capita spending is among the highest globally.

  • Inefficiency: Administrative costs are double that of single-payer systems.

  • Unequal access: Around 10% of people remain uninsured.

  • Cost-shifting: Uncompensated care raises costs for all.

  • Fragmentation: Dealing with multiple plans causes headaches for patients and providers.

  • Inflexibility: People can lose coverage by changing jobs.

  • Unsustainability: Medical costs are consuming a larger share of personal income.

Overall, the mixed private-public healthcare financing paradigm in the US has contributed to high prices, unequal access, and bloated administrative costs.

Who Should Pay for Healthcare?

There are differing opinions around who should foot the bill for healthcare expenses.



  • Makes people cost-conscious and responsible for their health

  • Aligned with principles of free-market capitalism


  • Unaffordable for many and discourages needed care

  • Inequitable since health is partly determined by genetics and luck



  • Spreads risk over large pools of employees

  • Convenient for workers and simple payroll deductions


  • Burdensome mandate on businesses

  • Costs passed to workers through lower wages



  • Achieves universal coverage through programs like Medicare

  • Maximizes risk pooling and economies of scale

  • Can negotiate costs aggressively


  • Increases tax burden

  • State involvement opens door for red tape

  • Stifles private market innovation

Hybrid Model


  • Allows choice based on preferences

  • Captures efficiencies of private sector


  • Leaves gaps in coverage

  • Administrative duplication and high costs

There are reasonable arguments on both sides of this debate around public vs private payment for healthcare. Most experts believe a balanced approach is needed.

How Could Healthcare Funding Be Improved?

There are a few ways the US healthcare financing model could potentially be improved:

  • Create a public option to compete with private insurers

  • Allow people to buy into Medicare before age 65

  • Introduce all-payer rate setting to lower costs

  • Establish monthly caps on out-of-pocket spending

  • Increase transparency around healthcare prices

  • Reduce administrative overhead through consolidation

  • Shift away from fee-for-service model to value-based care

A hybrid system with both public and private funding sources is likely here to stay in America. But better regulations around private insurance combined with expanding tried-and-tested public programs could make healthcare more affordable and accessible.

Key Takeaways

  • Healthcare spending in the US involves private and public payers including employers, government, insurers, and individuals.

  • While the current mixed model provides choice, it suffers from high costs, inefficiencies, gaps in access and complexity.

  • There are good-faith arguments on all sides around whether individuals, employers, or the government should foot most of the healthcare bill.

  • The optimal solution likely involves a balanced approach with prudent government intervention and plenty of consumer choice. Most Americans agree that some form of universal coverage is desirable.

Fundamental healthcare financing reform remains controversial. But steps can be taken to pragmatically improve America’s flawed yet dynamic healthcare payment landscape.

The real reason American health care is so expensive


Who pays for healthcare costs in the US?

Prescription drug spending increased 8.4% to $405.9 billion in 2022, faster than the 6.8% growth in 2021. The largest shares of total health spending were sponsored by the federal government (33 percent) and the households (28 percent).

Who is responsible for health care in the United States?

Federal. At present, the main federal unit with responsibility for public health is the United States Public Health Service in the Department of Health and Human Services.

Do US citizens have to pay for healthcare?

In 2010, the ACA was signed by President Barack Obama and includes various new regulations, with one of the most notable being a health insurance mandate which requires all citizens to purchase health insurance.

How do most Americans pay for their healthcare?

Large shares of insured working-age adults surveyed said it was very or somewhat difficult to afford their health care: 43 percent of those with employer coverage, 57 percent with marketplace or individual-market plans, 45 percent with Medicaid, and 51 and percent with Medicare.

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