represented the direct out-of-pocket payments.

Philanthropy.-Private philanthropy accounted for $1.5 billion or 3.6 percent of the total spent for health. Since 1950, philanthropy has provided a decreasing proportion of the expenditures for personal health care ($634 million in 1965) but an increasing share ($825 million in 1965) of the funds for research and medicalfacilities construction.

Other private sources.-The remaining private expenditures of $1 billion included the amount spent by industry for in-plant health services (more than $300 million) and an estimated $600 million expended for hospital construction.

Government.-Government was the source of $10.2 billion in health spending in 1965, with more than half ($5.3 billion) originating from the Federal Government. Government expenditures accounted for more than one-third of expenditures for hospital care, almost 90 percent of those for research, and approximately onethird of those for construction.

The distribution of government funds shown in table 1 is based on the ultimate source of funds and shows as Federal funds those amounts expended by State and local governments under grant-in-aid programs. These grant-in-aid funds

include those for public assistance (vendor medical payments), maternal and child health programs, public health categorical programs such as tuberculosis and venereal disease control, and hospital construction.

Health care or health benefits provided by the Department of Defense, the Veterans Administration, and the Public Health Service are shown as direct Federal expenditures.

In terms of the unit of government making the outlay, $4.2 billion was spent in 1965 by the Federal Government directly and $6.0 billion by State and local governments (table 2). The difference between these estimates and the amounts shown in table 1 are the grant-in-aid funds.

Types of Service

Hospital care.-Expenditures for hospital care continued to constitute the largest item of national health expenditures and in 1965 reached $13.4 billion, or almost 33 percent of total health expenditures.

Of the total, 58 percent was for care in nongovernment hospitals, 30 percent for care in State and local government hospitals, and 11 percent for care in Federal hospitals (table 3). Hospital care estimates in this series include both inpatient and outpatient hospital services.

Consumer payments of $8.1 billion met 60.7 percent of all hospital care expenditures. Insurance benefits amounted to $5.8 billion and met 71.2 percent of all consumer expenditures for hospital care and approximately 43 percent of all hospital care expenditures. Government provided $4.9 billion, or almost 37 percent of the funds for hospital care; philanthropy paid for more than 2 percent. Third-party payments amounted to 82.5 percent of all hospital care

costs.

The sources of financing vary with the ownership of the hospital. Federal facilities, which include facilities maintained by the Defense Department, the Veterans Administration, and the Public Health Service, are almost exclusively financed by the Federal Government. State and local government hospitals received 66 percent of their financing from public sources ($2.7 billion):

62 percent ($2.5 billion) came from State and local government sources; and a small amount (166 million) came from the Federal Government. Consumer payments of $1.4 billion provided the balance. Voluntary and proprietary nongovernment hospitals received $6.8 billion or 87 percent of their income from private consumers, $696 million or 9 percent from government, and $305 million or 3.9 percent from philanthropy.

Consumers were the source of most of the expenditures in general hospitals, and government provided $3.0 billion or 26.9 percent, with the balance coming from philanthropic sources. In contrast, public funds were the source of 87 percent of the care in psychiatric hospitals and 86 percent of the care in tuberculosis hospitals.

Government expenditures for hospital care include not only Federal, State, and local government expenditures for maintenance of publicly

BULLETIN, FEBRUARY 1967

owned hospitals but also vendor payments for care of patients under various public medical care programs. Payments in 1965 under the largest of these programs-vendor medical payments under public assistance-were estimated at $644.7 million.

Physicians' services.-Expenditures for the services of physicians in private practice amounted to $9.0 billion in 1965, or 22 percent of all health expenditures. Consumers, directly or through insurance, were the source of almost 94 percent ($8.4 billion) of the expenditures. Health insurance payments met approximately 32 percent of consumer payments for physicians' services and almost 30 percent of all expenditures for these services. (This year more accurate information became available on insurance payments, permitting the allocation of payments previously reported for physicians' services to other types of care, such as nursing homes, special nursing, etc.)

The balance of the expenditures for physicians' services consisted mainly of government expenditures ($566 million) and small amounts of philanthropic payments (estimated at $9 million). Public payments for the services of physicians in private practice will probably show a considerable rise in 1966 when the expanded public assistance medical program and the program of health insurance for the aged have been in operation.

Dentists' services.-Spending for the services of dentists in private practice amounted to $2.8 billion in 1965. Almost all expenditures for the services of dentists were consumer payments ($2.8 billion), with government funds paying for only slightly more than 1 percent of these services.

Other professional services.-Slightly more than 2 percent of the health dollar ($896 million) was spent for other professional services. These services include the services of registered and practical nurses, podiatrists, chiropractors, naturopaths, physical therapists, clinical psychologists, and Christian Science practitioners in private practice and the expenses of private visiting-nurse associations.

Drugs and drug sundries, eyeglasses, and appliances. Total expenditures for drugs and drug

sundries amounted to $4.8 billion, or almost 12 percent of all health expenditures; of the total, $4.6 billion was spent by consumers. Expenditures for eyeglasses and appliances were $1.3 billion, and again the bulk of the expenditures came from consumers.

Nursing-home care.-Total estimated expenditures for nursing-home care were $1.3 billion, of which government funds paid approximately $510 million and consumers approximately $793 million, and the small balance was paid for from philanthropic sources.

Net cost of insurance.-Consumers spent $1.3 billion for insurance service. These are the retentions of the health insurance organizations for operating expenses, additions to reserves, and profits and are exclusively a consumer expenditure.

Medical activities in Federal units other than hospitals. Expenditures for medical facilities, such as dispensaries and outpatient clinics separate from hospitals that are operated by the Federal Government, reached $858 million in 1965. Included in such expenditures are the costs of maintaining military medical dispensaries, field stations, and medical units on naval vessels. The increase in this category of expenditures between 1964 and 1965 was more than 23 percent, reflecting the activities in Viet Nam.

Government public health activities.-Federal, State, and local governments spent $947 million for public health activities. Although some personal health care expenditures are included (services in public health clinics, for example), the expenditures in this category are primarily for community and environmental health services. State and local governments were the source of $629 million or 66 percent of public health expenditures, and the Federal Government was the source of $318 million.

Voluntary health agencies.-Philanthropic expenditures of voluntary health agencies were $275 million in 1965. This category represents

2 See Louis S. Reed, "Private Health Insurance: Coverage and Financial Experience, 1965," Social Security Bulletin, November 1966.

residual expenditures of voluntary health agencies for community health activities, health education, and administrative costs. Expenditures of these agencies for research, hospital care, and physicians' services are shown under the specific services.

School health services and industrial in-plant health services.-School health services provided by public education agencies amounted to $133 million in 1965. Services of this type that are provided by public health agencies are included with public health activities. Expenditures for in-plant health services totaled $338 million.

Research.-Expenditures for medical research amounted to almost $1.5 billion, an increase of approximately 13 percent over 1964. Government funds were the source of 89 percent or $1.3 billion of these expenditures. The Federal Government continued to be the major supplier of funds for medical research and provided 85 percent of all funds for this purpose in 1965.

Medical facilities construction.-Almost $2.0 billion was spent for the construction of medical facilities, with $1.3 billion or slightly more than two-thirds of the funds provided from private sources. About $319 million or 16 percent came from the Federal Government, and $343 million or 17 percent was from State and local governments. Approximately 30 percent of the Federal funds supported the construction of privately owned facilities, but the bulk of State and local funds went for the construction of State and local facilities. The remaining amount of Federal funds $223 million-was spent for the construction of military, veterans, and other Federal facilities and for grants-in-aid for the construction of State and local government facilities.

Private funds include philanthropy (gifts of corporations and individuals) and and "other" sources (accumulated funds of hospitals and loans and funds advanced by proprietary interests).

HISTORICAL DATA

National health expenditures increased from $12.9 billion in 1950 to $40.8 billion in 1965

(table 4). In 1950 these expenditures had represented 4.5 percent of the gross national product ; in 1965 they accounted for 6 percent of the gross national product. Per capita expenditures increased from $84.49 to $209.40 (table 5). In absolute terms, per capita expenditures increased by 148 percent. If the increases are adjusted to account for the changes in the cost of living, per capita expenditures increased by 89 percent from 1950 to 1965.

There were only slight changes in the distribution of the sources of funds for all health purposes from 1950 to 1965. Private expenditures represented 72 percent of the expenditures in 1950, 74 percent in 1955, slightly more than 75 percent in 1960, and slightly less than 75 percent in 1965.

Type of Service

Some changes occurred in the distribution of health expenditures by type of service between 1950 and 1965. The more perceptible shifts were increases in expenditures for hospital and nursing-home care and research, with relative declines in the spending for most other types of service. Expenditures for hospital care as a proportion of all national health expenditures rose from 29.9 percent in 1950 to 32.8 percent in 1965 (table 6). The distribution of hospital expenditures by type of hospital showed a considerable shift. In 1950, 19 percent of the hospital expenditures were for

care in Federal facilities, compared with 12 percent in 1965. Expenditures for care in State and local government facilities remained at a constant 30 percent, but expenditures for care in nongovernmental facilities rose from approximately 51 to 57 percent.

In the article on national health expenditures in the BULLETIN for January 1966, the estimates indicated a decline in the proportion of health expenditures for the services of physicians in private practice. Revised data for 1964 and estimates for 1965 indicate that the proportion of expenditures for physicians' services has not dropped but risen slightly. The upward revision of the estimates for 1964 and 1965 are based on more recent data from the Internal Revenue Service and can probably be attributed to a combination of factors, including an improved datacollection and reporting system and a rise in medical care prices.

The relative importance of expenditures for the services of dentists and other professionals, and for drugs, eyeglasses, and appliances has declined. The greatest percentage increase in gross and per capita expenditures for health supplies and services was for nursing-home care. In 1950, nursing-home care took 1.1 percent of the health dollar; in 1965 it used up 3.2 percent.

Except for school health services and the net cost of insurance, all remaining components of health services and supplies declined in importance.