Ever wondered how much the federal government actually spends on health care? Brace yourself—in Fiscal Year (FY) 2024, the U.S. government spent a staggering $1.9 trillion on health care programs and services, according to KFF. That’s 27% of all federal spending, making it one of the biggest categories in the entire budget.
But wait—it gets even bigger when you factor in tax breaks related to health insurance.
On top of direct spending, the federal government also gave up $398 billion in tax revenue due to health-related tax breaks. This includes subsidies for employer-sponsored insurance (ESI) and Affordable Care Act (ACA) premium tax credits, which help millions of Americans afford coverage.
Where Does Federal Health Care Money Go?
Here’s how that massive $1.9 trillion was spent:
? Medicare – 36% ($702 billion)
The biggest chunk of the budget goes to Medicare, the health insurance program for seniors and some people with disabilities. With an aging population, Medicare costs are expected to keep rising in the coming years.
? Medicaid & CHIP – 25% ($482 billion)
The federal government funds a large part of Medicaid and the Children’s Health Insurance Program (CHIP), which provide coverage for low-income Americans and kids. Medicaid is a joint federal-state program, meaning states also contribute money, but the federal government covers most of the costs.
? Employer-Sponsored Insurance (ESI) Tax Breaks – 17% ($332 billion)
If you get health insurance through your job, the government helps pay for it—just in a less direct way. Employer-sponsored health insurance premiums are tax-free, meaning workers and companies pay less in taxes. This is one of the biggest (and often overlooked) forms of government health care spending.
? ACA Marketplace Subsidies – 5% ($91 billion)
Under the Affordable Care Act (ACA), the federal government helps millions of Americans afford private health insurance by providing subsidies based on income. Without these, many people wouldn’t be able to pay for coverage.
? Other Health Care Spending – 17% ($318 billion)
This category includes everything from veteran health care, military health benefits, public health programs, and research at agencies like the NIH and CDC.
Beyond Direct Spending: The Hidden Cost of Health Care Tax Breaks
One of the biggest surprises in federal health care spending? The amount of money lost in tax breaks for health insurance.
In addition to the $1.9 trillion in direct spending, the government also gave up $398 billion in tax revenue because of:
- Employer-sponsored health insurance tax exemptions
- ACA marketplace subsidies
- Health savings accounts (HSAs) and other tax benefits
These tax breaks may not seem like spending at first glance, but they reduce the amount of money the government collects—just like writing a check for health care costs.
What This Means for You
With health care making up over a quarter of the federal budget, any changes—whether cuts, expansions, or policy reforms—will directly impact your access to medical services, insurance costs, and even your paycheck.
Some experts argue that government spending on health care keeps millions of Americans covered and prevents bigger costs down the road. Others believe the government should cut costs and find more efficient ways to manage spending.No matter where you stand, one thing is clear: health care spending is a major factor in the federal budget and affects nearly everyone in the country.
