What the Government Spends on Health Care

Blog Post
Friday, June 01, 2018

The Congressional Budget Office (CBO) recently released an update to its estimates and projections of the cost and use of federal government subsidies for health insurance for people under age 65.

The headline number is that the government will spend $685 billion in 2018 on such subsidies, helping 89 percent of the 273 million people under age 65 in the United States get health insurance.

The majority of those insured, 158 million people, get coverage from their employers and are subsidized through the tax code -- which excludes health insurance costs from taxation for both employers and employees. This subsidy will cost $266 billion in 2018.

Medicaid and the Children’s Health Insurance Program (CHIP) insure 67 million people. Of those, 12 million are eligible for Medicaid due to its expansion from the Affordable Care Act (ACA), 6 million are on CHIP, and the remaining 49 million are otherwise eligible for Medicaid. These programs cost $296 billion.

Around 9 million people get subsidized health insurance due to the ACA, primarily through its insurance marketplaces, at a cost of $55 million.

The subsidies for health care for those under age 65 are about equal to what the U.S. government spends on the population over 65 for health care -- primarily through Medicare.

It’s worth noting that around 8 million people under 65 get insurance through Medicare due to disability-based eligibility. This $82 million cost is about an eighth of total Medicare spending. It’s also worth noting that about a fourth of total Medicaid spending is on people over 65.

This edition of the CBO’s report was interesting because it was the first update taking into account the elimination of the individual mandate to purchase health insurance and some changes to the ACA’s individual insurance market from Trump administration actions.

Relative to prior projections, the number of people without insurance in the year 2027 will be 5 million higher. About 3 million fewer people will get subsidized coverage on the ACA’s health insurance exchanges. The cost of insurance subsidies over the next 10 years is projected to be 5 percent lower.

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