Federal health care spending has reached a historic turning point. It is now the single largest category of federal expenditures, having surpassed other spending categories including Social Security, national defense, and interest payments made to chip away at the national debt. If current trajectories hold, health care will be eating up an enormous share of the country’s spending for years to come.
And the numbers are astonishing. The surge will be led by Medicare, which is projected to double in cost from $988 billion in 2025 to almost $2 trillion by 2036. Over the next decade spending on Medicaid and the Children’s Health Insurance Program is also expected to grow by 36%, while subsidies for the Affordable Care Act marketplaces are forecasted to rise by a third from their current levels. It adds up to a fiscal trajectory that threatens to crowd out other spending and destabilize the nation’s primary safety nets.
According to the CRFB, the rapidly devolving outlook comes down to two main factors: higher projected medical costs and a sharp reduction in revenue caused by President Donald Trump’s signature One Big Beautiful Bill Act. That legislation’s tax cuts significantly reduced the income the Medicare trust fund normally receives from taxing Social Security benefits.
The result is a federal budget increasingly dominated by health care, which accounts for 30% of all projected spending growth through 2036. While the projections are grim, the CRFB issued some policy recommendations that might steer the nation away from the cliff. The organization suggested measures to ensure the government pays the same rate for a service regardless of where it is performed. It also suggested cracking down on programs that are vulnerable to overpayments, such as Medicare Advantage.
If no action is taken, and the trust funds run dry, it would charge the government with some extremely difficult decisions. Should the Medicare trust fund become exhausted, it would be restricted to paying out only what it takes in, which means benefits would likely be slashed. Without intervention, the federal government could be forced to choose between deeper debt or severe cuts to care, the CRFB warned.
