Two ways to answer "who pays"
There are two honest answers to who pays for American health care, because the money is tracked two ways. The first is by payer — the entity that directly cuts the check to the hospital or doctor. The second is by sponsor — who ultimately provides the money in the first place, before it flows through an insurer or a government program. Both are worth seeing, because the gap between them is part of the story.
By payer: who cuts the check
The remaining share is split between out-of-pocket spending — $557 billion, about 11% — and a mix of other third-party payers, government programs, and public health activity making up the rest. Taken together, public programs (Medicare, Medicaid, CHIP, VA, and others) finance around 43% of all health care, while private insurance covers about a third.
There is an asymmetry buried in these numbers, and it is easy to misread. Private health insurance covers over half the US population but accounts for only about a third of the spending. Public programs cover fewer people and a larger share of the cost — which is exactly what you would expect, since they serve the populations that need the most care: older adults, people with disabilities, and those with lower incomes and greater health needs. That much is straightforward.
What the table does not show is who is actually running the money.
What the payer categories hide
The categories above describe where the money comes from. They say nothing about who administers it — and on that question the picture changes substantially.
Medicare Advantage — private insurance plans, paid by Medicare, covering Medicare beneficiaries — now enrolls more than half of all Medicare beneficiaries, roughly 35 million people. Medicare paid those private plans an estimated $494 billion in 2024. Every dollar of it is counted above as "Medicare," not as private insurance. The same holds in Medicaid, where the large majority of enrollees are covered through private managed-care plans.
So private insurance is not one-third of American health care. It is the operating layer for a substantially larger share of it — including much of the spending this table files under "public."
The split above invites a conclusion the evidence does not support: that private coverage is the cheaper way to cover a person.
The Medicare Payment Advisory Commission — the independent body that advises Congress — estimates Medicare pays Medicare Advantage plans considerably more than it would spend on the same people in traditional Medicare. Recent annual estimates run from roughly $76 billion to $84 billion in excess payments, on the order of 14% to 22% above what those beneficiaries would otherwise have cost. MedPAC attributes this to two mechanisms: coding intensity — documenting more diagnoses so enrollees appear sicker and generate higher payments — and favorable selection, since MA plans tend to enroll healthier people than their risk scores suggest.
The industry disputes the methodology, and that dispute is worth noting. But the direction is not seriously contested: the Department of Justice is investigating the largest MA insurer over its billing practices, Kaiser affiliates agreed to a $556 million settlement over upcoding allegations, and budget analysts project the overpayments will exceed a trillion dollars across the coming decade. The privately administered portion of Medicare is not saving the program money. It is costing it money — and the mechanism is the paperwork, not the care.
By sponsor: who actually provides the money
Follow the money back one more step — past the insurer and the government program to whoever actually supplied it — and the picture shifts:
State and local governments account for another 16%, and other private sources the small remainder. But notice what the household number hides. That 28% is only what households pay directly — premiums, copays, deductibles, and the taxes earmarked for health programs. It does not capture the wages absorbed by the employer's "share" of premiums, which economists broadly agree comes out of worker compensation in the end. When that is accounted for, households ultimately shoulder far more of the burden than the sponsor table suggests.
One trend matters more than the static shares: private insurance spending per enrollee has grown far faster than the public programs over the past fifteen years — roughly 80% growth per enrollee, against closer to 50% for Medicare and 30% for Medicaid. Private insurance also pays higher prices to providers than public programs do for the same services. The fastest-growing, highest-priced corner of the payment system is the private-insurance layer that sits between the patient and the primary care relationship.
The framework's reading
The deepest problem in "who pays" is not any single share. It is the distance the money travels between the person receiving care and the person providing it. A patient sees a doctor; the doctor bills an insurer; the insurer is paid premiums by an employer; the employer funds those premiums out of wages the worker never sees. By the time a dollar reaches the exam room, it has passed through so many hands that no one in the transaction is quite sure what anything costs — least of all the two people actually in the room.
This distance is not incidental. It is where administrative cost accumulates, where price signals disappear, and where the primary care relationship gets buried under billing. And it is not shrinking. The Medicare Advantage figures show the intermediary layer expanding — moving into the public programs, adding a margin, and taking tens of billions a year for the service of standing between a patient and their care.
The framework's answer — and the cooperative model described elsewhere on this site — is to collapse that distance for primary care: to let the person and the care team transact directly, without an insurance intermediary standing in the middle of the everyday relationship. Insurance has a proper and essential role in covering catastrophic, high-cost events. But it does not belong in the middle of ordinary, continuous primary care, where its main contribution is distance and cost — and taking it out of that relationship is exactly what the cooperative model is built to do.