Currently the most basic economic unit the health care system (as one would expect) is the individual health consumer (regardless of insurance status) – thus the consumer body provides the base of this rather nasty pyramid. For the most part, each individual health consumer pays only a small percentage of their overall health care costs – through their insurance premiums and out-of-pocket deductible payments at the doctor’s office.

Truth be told, for the majority of Americans, the largest portion of their health care expenses are covered by their employer. At last estimates approximately 58% of Americans get their health insurance through their employers. The average cost of premiums per individual was $3,515 in 2009 whereas for employers (particularly major employers such as GE or IBM) the cost for providing health insurance to employees was $9,860. Thus, the burden of directly paying for insurance for individuals primarily falls on the employer community.

This in turn leaves the employers motivated to keep health care costs as low as possible, and they place that burden largely upon their contracted health insurance provider companies. These insurance companies are then forced to contain costs to the best of their ability. However, in large part they do this by limiting their direct health care expenditures by denying medical claims, rescinding coverage to individuals, or denying the application of individuals they deem as too large a “financial risk” for pre-existing conditions, age, gender, or any of a number of other reasons.

Because health insurers (as cost containment companies) are in the business of paying for as little health expenditure as possible another party has to step up to the plate to either directly or indirectly to fill in all the fiscal gaps that remain in the health care system. The government, generally the federal government, fills this particular role. Through government payer systems such as Medicare, Medicaid, and SCHIP the federal and state governments provide health coverage to the sickest, the oldest, the youngest, and generally the neediest elements of the American society. The federal and state governments provides health care for those who lack coverage (or lack appropriate insurance) by paying for about 80-85% of all “uncompensated care”, such as emergency room usage, as required by the Emergency Medical Treatment and Labor Act of 1986 and through the national system of Federally Qualified Health Clinics.

In fact all government spending combined (Medicare, Medicaid, Department of Defense, Veteran Affairs, Indian Health Services, etc.) provides direct health coverage for approximately 30% of all Americans and in total (both direct and indirect costs) accounts for approximately 50% of American health care spending. In many cases by the time the bill gets trickled up to the government level it is for the most expensive and inefficient populations and systems since it quite literally is the buck that everyone else already passed off.

One major issue with this end point is that no government, state or federal, can make money (with value) out of thin air. What the government spends on health care, one way or another is eventually looped back down to the individual in the form of higher taxes.

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