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Trillions spent on health care, safety net credited with narrowing EU wealth gap

Over the last two decades, EU spending on social benefit programs has increased by billions of euros.

(CN) — The European Union’s top 5% wealthiest people earned nearly five times as much as the bottom 5%, but its statistics agency found social transfers — including social assistance and sickness benefits — reduced income inequality by nearly 60%. Analyses of health care and child benefits published by Eurostat on Monday reveal parallels between a strong social safety net and lower income inequality.

Similar to the U.S. concept of welfare, Eurostat defines social protection benefits as “transfers, in cash or in kind, made to relieve households and individuals of the burden of one or more social risks or needs.”

Using a standardized currency, the average person in the EU has 17,871 units of disposable income, ranging from 7,724 in Romania up to 28,675 in Luxembourg. Luxembourg also ranks among the highest in the EU for health care spending and other benefits.

In 2019, the EU spent 1.1 trillion euros ($1.14 trillion) on health care benefits, nearly 8% of GDP and 30% of total social safety net spending. More than 40% of benefits went to in-patient health care, while 30% went to outpatient care and 14% to paid sick leave.

At nearly 4,000 euros ($4,100) per person, Germany spent the most on health care per person, followed by Luxembourg and the Netherlands. At 10% and 9%, Germany and the Netherlands also spent the highest portions of GDP on health care benefits.

At the low end, Bulgaria, Latvia and Greece each spent less than 1,000 euros ($1,025) per person.

Bulgaria, Romania and Lithuania reported the highest income gap among member states in the EU. Greece and Latvia rank among the second highest category.

According to the National Health Expenditure Accounts, roughly 20% of the U.S. health care costs ($830 billion, or 850 billion euros), were covered by federal Medicare and 16% ($671 billion, or 655 billion euros) by Medicaid for low-income families.

Other social benefit spending across the EU includes programs tailored for old age and survivors, disability, unemployment, housing and social exclusion, as well as families and children.

EU spending on social protection programs covering family and children benefits topped 315 billion euros ($323 billion) in 2019, about 2.3% of the region's GDP. While amounting to 8.4% of social benefit spending, child and family protections rose from 27% to 39% in the two decades following 2000, as the number of children in the EU declined 8%.

Comparatively, the U.S. spends 7% of its federal budget ($482 billion, or 470 billion euros) on children. Per the National Bureau of Economic Research, the U.S. spent $200 billion in 2016 on programs providing aid to low-income families with children.

The EU’s boost in benefits followed increased spending on allowances, childbirth income maintenance and child care.

“The rise in expenditure on child day care is perhaps unsurprising given that EU employment policy has strongly encouraged the importance of affordable child care in allowing parents to work (if they want to) while raising a family,” the report explained.

Using a purchasing-power standard that takes into account varying cost of living across member states, the average EU county spent 3,875 units per child. Luxembourg spent the most per child, 12,237 purchasing power standard units and allotted the highest portion of the social benefits budget, 15% to families and children.

Across the rest of member states, per child spending ranged from 7,891 units in Germany to 481 units in Cyprus.

Ranking at the top, Luxembourg, along with Germany and Denmark each spent 3% of GDP on family-children benefits in 2019. At 0.8%, Malta spent the least on family-children benefits, followed by Cyprus, 1%, and Italy, 1.1%.

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