The federal government spent $1.9 trillion on healthcare programs and services in 2024–the single largest category of federal spending. As President Donald Trump's budget proposal makes its way to the Senate after clearing the House on Feb. 25, many are concerned how his plans will affect healthcare spending.
As healthcare policy and budgets take center stage in the United States, it can be helpful to shed light on where these funds are spent and how they impact Americans.
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Healthcare Spending in the Federal Budget
Recent data from KFF reveals that healthcare spending made up about 27% of federal spending in 2024. To put that in perspective:
- Social Security accounted for 21%
- National defense and interest payments on the debt each took up 13%
Most federal healthcare funding supports health insurance programs, tax subsidies, and discretional health initiatives. More than 80% of the spending supported programs like Medicare, Medicaid, and employer-sponsored healthcare insurance.
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Where Does the $1.9 Trillion Go?
Federal healthcare spending goes toward several important programs:
- Medicare (36%): The program mainly supports adults aged 65 and older and accounts for the largest portion of federal healthcare spending. In 2024, about $839 billion was spent on Medicare.
- Medicaid and CHIP (25%): These programs, which cover low-income individuals and families, received about $584 in federal funding.
- Employer-based Health Coverage (17%): Employers receive tax subsidies for sponsoring healthcare coverage. These subsidies cost the government roughly $384 billion in 2024.
- Affordable Care Act Subsidies (5%): Tax credits for healthcare premiums in the ACA Marketplace accounted for about $111 billion.
- Veterans' Health and Other Discretionary Spending (8%): Discretionary spending covered veterans’ hospital and medical care ($128 billion), funding for the National Institutes of Health ($45.5 billion), and Centers for Disease Control and Prevention programs ($8.8 billion).
- Global Health Initiatives (4%): This includes international health assistance programs through the U.S. Department of State and the U.S. Agency for International development.
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Mandatory vs. Discretionary Spending
Most healthcare spending (about 70%) is mandatory, meaning it's set by existing laws rather than annual budget negotiations. Programs like Medicare, Medicaid, and ACA subsidies fall into this category.
The remaining portion—discretionary spending—is approved annually by Congress. This includes funding for veterans' healthcare, medical research, and disease prevention efforts. In 2024, discretionary healthcare spending totaled $247 billion.
How Healthcare Funding Decisions Impact Access
Decisions about where healthcare dollars go have a big impact on coverage and access to services. When lawmakers consider cuts to healthcare programs, they look at how these changes will affect patients, healthcare providers, and the economy.
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For instance, if Medicaid were cut, we could see a rise in the number of uninsured Americans. Lawmakers have already stated that they would oppose any budget proposals that could harm such critical programs. Reductions in Medicare reimbursements could also hurt hospitals and other healthcare providers.
Tax subsidies for employer-sponsored insurance keep costs lower for businesses, allowing them to offer healthcare coverage to employees. Adjustments to these subsidies could impact the millions of Americans who receive insurance through their workplace.
Why It Matters
Understanding how the government spends on healthcare helps taxpayers, policymakers, and consumers navigate potential changes. With ongoing debates over spending and tax policy, any shift in federal healthcare funding could ripple through the economy, affecting insurance coverage, healthcare access, and affordability.
As discussions continue, staying informed about these issues can help Americans prepare for changes that might impact their healthcare costs and options.
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