Health Spending Consumes Half of Federal Revenues

Last week, I updated some information I collected in 2008 on health care spending. As expected, the cost of health care has continued to rise and it consumes a larger share of GDP than ever before, but the figure that really jumped out at me is the share of government revenue that is spent on health care.

In 2010, more than half of federal revenues were spent on health care. That’s up from 31 percent in 2006 and 2007, which is the last time I looked at this number. There are logical reasons for why health care now consumes so much of the federal budget—the expansion of prescription drug coverage in Medicare boosted spending early in the decade and the terrible economy in recent years has cut tax revenue—but central message I get from this data is that we desperately need to figure out how to address the cost of health care.

Yes, economic recovery and higher taxes could increase revenue and thus reduce the share of revenue that goes to health care. However, those are only short-term fixes. The real solution is to stabilize and eventually lower the cost of health care.

This figure shows the share of federal government revenues spent on health care in the past decade.

Centers for Medicare and Medicaid Services, Office of the Actuary, National Health Expenditures 2010: Sponsor Highlights, no date.