The federal government is by far the single largest payer for health care in the US. Those costs are one major reason we have ongoing huge deficits. The ill-conceived Obamacare “reform” is responsible for much of the growth in health care spending and the surge in federal costs. The Congressional Budget Office has released a new report giving the full scope of federal subsidization of health care spending in the period from 2026 to 2036. Over this period, “subsidies” are expected to cost over $33 trillion. The biggest single item is Medicare, at over $16 trillion. The federal government pays almost all the health care costs of people covered by Medicare. This number can be reduced by reforming Social Security disability, which creates automatic Medicare enrollment, by raising the age of eligibility, by means testing premiums, by moving everyone to Medicare Advantage and reforming the MA payment method, and other changes. Since Medicare is basically broke or funded by current revenues, we are going to have to do something in the very near future.
The next biggest item is Medicaid and CHIPS, the child insurance programs, projected to be $8.4 trillion, which is only part of the real cost of Medicaid because the states pay some of the total. These programs are riven with fraud and are widely used by people who could work. The coverage is absurdly good, far better than those people covered by employment-based insurance have. Rigorous work requirements should be put in place, some items of coverage should be dropped and other reforms undertaken. But the real solution from a federal perspective is to eliminate this as a federal program. Any help for low-income persons should be implemented and operated at a state level.
The third largest item is the “subsidy” for employment-based health insurance at $7.2 trillion. It is subsidized because employers are allowed to deduct the cost (employee’s bizarrely aren’t) from revenue and so they avoid that amount of tax. Since I don’t think corporations should be taxed at all, but rather dividends of excess cash should be mandatory and then taxed as ordinary income (rich people would pay the vast majority of this), this subsidy would then disappear. The exchange insurance tax credits and some other programs account for the remaining $2 trillion.
In 2026 the subsidies are projected to cost $2.4 trillion, or over 7% of our entire GDP. We are not going to get the deficit under control without addressing health spending and the sooner we do it the less painful it will be. But Congress is gutless and isn’t taking this seriously, so we are all going to pay a huge price when funding runs out and/or interest rates on the US debt spike to unsustainable levels. (CBO Report)
