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Health care is an inviting target for budget cutters in Washington. One of every four dollars in federal spending in fiscal year 2024 was used to pay for health programs and services. The next-largest categories are Social Security (21%), national defense (13%) and interest payments on the national debt (13%). Combined, these four categories account for nearly three-quarters of all federal spending.
“With spending on health programs accounting for a substantial share of federal spending, those programs are an obvious target to achieve overall spending goals in current budget reconciliation discussions,” according to a new report published by KFF. “Medicaid has been the primary focus for federal spending cuts, but cuts to Medicare and the Affordable Care Act have also been floated.”
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Although cuts to discretionary spending, which includes funding for several federal health agencies, veterans’ health care and global health, are not part of the reconciliation process, the administration has taken unilateral action to reduce this spending.
“Proposed cuts to federal spending on health programs and services have trade-offs and could increase the number of people without insurance; reduce access to health care; increase consumer costs for health care; and reduce payments for hospitals, nursing homes and other providers,” the report said “The effects would be felt by people of all incomes but would likely be concentrated among people with low incomes.”
Researchers analyzed current support from the federal government for health programs and services. The key takeaways include:
- The federal government spent $1.9 trillion on health care programs and services in fiscal year 2024 (27% of all federal outlays), which collectively is the largest category of federal spending.
- Forgone tax revenues to the federal government resulting from tax subsidies for employer-sponsored insurance coverage and a portion of the ACA premium tax credits together totaled $398 billion.
- More than 80% of all federal support for health programs and services, including spending and tax subsidies, goes to programs that provide or subsidize health insurance coverage. This includes 36% going to Medicare, 25% to Medicaid and CHIP, 17% to employment-based health coverage and 5% to subsidies for ACA coverage.
- Discretionary spending is a relatively small component of overall federal support for health programs and services. More than half (or $128 billion) of discretionary health spending paid for hospital and medical care for veterans. Discretionary health spending also provides funding for agencies such as the National Institutes of Health and the Centers for Disease Control and Prevention (CDC) (4%), as well as global health.
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Alan Goforth
Alan Goforth is a freelance writer in suburban Kansas City. In addition to freelancing for several publications, he has written a dozen books about sports and other topics.
