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Americans spent $1.2 trillion on hospital care in 2018. When broken down by the size of the average family, those costs account for just under 15% of a median household’s income.
That’s more than the average tax rate for that same family, which the 2017 Tax Cuts and Jobs Act lowered to 13.5% in 2019 for households that bring in $50,000 to $75,000 per year.
Americans pay a lot for health care, and the system may be the one thing in life that everyone -- regardless of political affiliation -- would like to change.
When it comes to agreeing on what changes to make, though, it gets tricky.
U.S. Rep. Mike Gallagher, R-Green Bay, proposed a bill on Feb. 14, 2020 aimed at forcing health systems to lower costs: the Transparent Health Care Pricing Act of 2020, which would require providers to publicly disclose the price of their products and services. It echoed a similar bill Gallagher cosponsored in 2019 that won bipartisan support.
The new bill was referred to committee that same day and hasn’t moved since, but Gallagher appeared June 25, 2020 on a Fox News program to discuss its effects if enacted.
On the segment, Gallagher said health care consumers don’t act as conventional consumers because they don’t compare prices before purchasing.
And rising costs, he claimed, have led to an unusual circumstance: "The average family in America forks over more of their hard-earned income to their local hospital than to the IRS."
Is Gallagher correct?
When asked for backup for the claim, a Gallagher spokesman pointed to a Jan. 26, 2019 Forbes opinion piece aptly titled "In 2018, The Average Family Paid More To Hospitals Than To The Federal Government in Taxes."
The piece was written by Avik Roy, president of the Foundation for Research on Equal Opportunity, a right-leaning think tank based in Austin, Texas. He breaks down the math problem he’s used to examine hospital costs and payments to the IRS.
He started with what Americans spend on hospital care overall: $1.2 trillion in 2018.
That is on the money — according to the Centers for Medicare & Medicaid Services, 33% of the nation’s $3.6 trillion in health spending during 2018 went to hospital care.
When divided by the 327.2 million people who lived in the U.S. that year, each person accounted for about $3,667 of that sum. Using census data to determine that the average American family consisted of 2.5 persons, Roy asserted that the "average" family’s share of money spent on hospital care was just under $9,280.
That’s about 14.7% of the 2018 median household income, which the census bureau placed at $63,179.
Comparatively, Roy says, the average family pays a lower percentage of its income in federal taxes. He points to the 2017 Tax Cuts and Jobs Act, which the federal Joint Committee on Taxation estimated would bring the average tax rate for a median-income household down from 14.8% to 13.5% for households that brought in $50,000 to $75,000 per year in 2019.
A median household income would fit into that range, and -- based on the earlier math -- would pay a larger share than that in hospital costs.
Gallagher said the average American family pays more to hospitals than in federal taxes.
Of course, "average" does not point to a singular real-life scenario here — no American family has 2.5 children and makes exactly the median income. Indeed, many families have no hospital expenses in a given year.
But numbers behind the claim relating to average situations add up.
We rate the claim True.
House resolution 5916, Feb. 14, 2020
House resolution 1409, Feb. 27, 2019
Youtube, "Mike on Fox Business: The Benefits of Price Transparency for American Health Care," June 25, 2020
Center for Medicare & Medicaid Services, "Nation’s Health Dollar: Where It Came From, Where It Went," accessed July 6, 2020
U.S. Census Bureau, Historical Households Tables, accessed July 6, 2020
U.S. Census Bureau, "U.S. median household income was $63,179 in 2018, not significantly different from 2017," accessed July 6, 2020
Joint Committee on Taxation, Distributional Effects Of The Conference Agreement For H.R.1, The Tax Cuts And Jobs Act, accessed July 8, 2020
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