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Home > Health Care > CHART OF THE DAY: Health care costs rise while tax revenue stagnates

CHART OF THE DAY: Health care costs rise while tax revenue stagnates

Aug. 31, 2020 by Matt Wolf

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As health care continues to represent a larger portion of U.S. gross domestic product, the federal government’s ability to finance that expenditure through tax revenues has relatively declined. Corporate taxes as a percent of GDP peaked at 2.6% in 2007. In the aftermath of the global financial crisis that proportion fell to 1% in 2009 and recovered to 1.9% in 2015. In 2018, the last year for which we have data, it was again at 2009’s level of 1%.

Corporate tax revenue is not the only source of funding for the government, nor is it the largest, making up 7% of revenue according to the Tax Policy Center. Certain health care programs receive assistance through payroll taxes and the bulk of the remaining federal revenue, 50% of total, comes from individual income taxes. Individual income tax receipts have shown a similar pattern to corporate tax receipts.

As health care costs rise and the government becomes more limited in its willingness or ability to fund the increase, the balance will fall to patients, millions of whom are facing financial hardships as a result of the pandemic. Last week for the 23rd week out of the last 24, we saw over 1 million people file for first-time unemployment benefits.

As government’s and patients’ ability to finance care diminishes, the health care providers and payors may have to bear the increased burden of cost.

Source: Bloomberg, U.S. Treasury Dept.

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Filed Under: Health Care Tagged With: GDP, health care costs, Matt Wolf

About Matt Wolf

@MattWolfHC

Matt leads RSM’s health care valuation consulting group. In this capacity, Matt helps health care clients evaluate mergers, acquisitions, joint ventures, and other growth strategies.

In January 2018, Matt was selected as a senior analyst RSM’s cutting edge Industry Eminence Program, which positions its senior analysts to understand, forecast and communicate economic, business and technology trends shaping the industries RSM serves. These senior analysts advise clients on conditions impacting middle market leaders. Matt’s focus is the health care and life sciences space.

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