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.
The government is on track to spend over $26 trillion on major health programs through 2036, according to the nonpartisan Committee for a Responsible Federal Budget’s review of the country’s most recent fiscal outlook, published Wednesday.
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.
This explosive growth in spending coincides with a dramatic deterioration in the solvency of the Medicare Hospital Insurance Trust Fund, which covers essential inpatient hospital and nursing facility care. That fund will now be exhausted by 2040, according to the Congressional Budget Office, a staggering 12 years ahead of the date projected just last year.
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.
Despite the crippling effect Trump’s policies are projected to have, the president himself maintains his administration will work to preserve the integrity of critical government programs. During Trump’s State of the Union address this week, he pledged to “always protect” Social Security, Medicare, and Medicaid. And while the Medicare trust fund has until 2040, the trust fund that supports Social Security could run out earlier, as soon as 2031.
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.
