• Does the federal government spend half its revenue on health care?

    The California Healthcare Foundation claims that the federal government spent half its revenue on health care in 2010. Is it true? Well, no.

    The report says that in 2010, the federal government spent $742.7 billion on health care and that 34% (or $252.1 billion) of this was Medicare. Already I am skeptical of this number because I know from reading Trustees and CBO reports that Medicare spending is about $500 billion.

    The report also says that when it counts government revenue, it excludes payments for social insurance. I guess that excludes payroll tax receipts for Social Security and Medicare. But that’s a lot of revenue, some of which is earmarked for health care.

    Turning to a different source, usgovernmentrevenue.com, which compiles data from official government sources, I find that total federal health care spending in 2010 was $846.8 billion (Medicare at $457.8 billion) and revenue was $2,162.7 billion. Dividing, I find that the federal government spent 39% of its revenue on health care.

    Just in case it isn’t clear, government revenue excludes debt. Either way you slice it, we’re financing a lot of what the government does with debt, and a huge amount is going to health care. Still, I find the claim that half of 2010 federal government revenue was spent on health care dubious. The facts are frightening enough. No need to cook the books* to make them seem more so.

    * Perhaps there are good arguments for why CHF’s spending numbers seem too low and for excluding social insurance tax revenue from revenue, but I don’t know what those could be.


    • Hi Austin,
      I recently did some research for a project and these are the numbers I found using CMS websites and a website called Government Spending at http://www.usgovernmentspending.com/
      The federal government portion of the government spending was represented by $769 billion for Medicare, Medicaid and Children’s Health Insurance Program (CHIP) and was matched with $486 billion in state funding (CMS Website 2, 2012). An additional $101 billion was spent on military and government employee’s health coverage (U. S. Government Spending Website, 2011).

      • Total Federal Spending: $3.6 trillion

      o Pensions $0.8 trillion
      o Health Care $0.9 trillion
      o Education $0.1 trillion
      o Defense $0.9 trillion
      o Welfare $0.5 trillion

      • Total Federal Revenue: $2.3 Trillion

      I have found lots of different info but I think these numbers are fairly accurate. I had to piece the federal employee and military health spending together so if there is a weakness in my numbers it would probably be there.

    • I’m looking at these numbers, and here’s my guess: it’s a guess.

      I think the statement should be “half of [general] revenue is spent on healthcare [that is funded out of general revenue].” Now the numbers seem to add up; the money that is collected for an earmarked purpose is not included either as revenue (hence the low revenue) or as spending (hence the low Medicare number.).

      • That’s a really good guess. It shouldn’t be to hard to verify (Trustees Reports, fed budget and revenue figures in detail, etc.), but I’m not going to do it.

        • Quick answer is that I don’t think half of federal general revenue is spent on health care because the spending on military exceeds the part of health care spending that comes from general revenue (see Jackie James above, whose numbers are about what I have seen elsewhere.) In addition to the military spending exceeding the health care component from general revenue, there are a large number of smaller expenditures from general revenue as well. Military spending, of course, comes 100% from general revenue.

          I suspect that the percentage of health care spending from general revenue is in the same ballpark or slightly less than the number for the percentage health care spending accounts for from all sources.

          On the same note, in attempting to allocate the contribution of health care to the debt and its interest payments, the part paid out of various trust sources needs to be subtracted from the part allocated to the debt and to associated interest expenses, since at the moment those trust funds are still in the black and actually contribute to financing of general revenue obligations rather than adding to them. This complicates accounting, as does the question of how to count health care spending directly related to the military, including things like CHAMPUS, the VA, etc.

          In summary, I would say that health care spending of all sorts accounts for the biggest fraction — but well under half — of all government spending, a smaller fraction — again well under half — of spending from general revenue, but will account for a larger fraction from general revenue when (and if) the Medicare trust is allowed to go bankrupt.

          Austin is right, CHF is wrong.

          However, if you want to go one step further, health care probably does account for around half of ALL government spending at all levels, once you add in the state component of Medicaid, S-CHIP, and state and local obligations for health care of employees — that last being another interesting accounting question in terms of how that should be charged to budgets.