Most Americans believe their healthcare is private, and the majority prefers it that way. Gallup polling shows more Americans favor a system based on private insurance rather than government-run healthcare.
But here’s a surprising reality: 91% of Americans receive government-subsidized healthcare.
Unless you’re among the uninsured or the few who receive no subsidies, government dollars are helping pay your medical bills — whether your insurance comes from an employer, a privately managed care organization or the online marketplace.
Now, as lawmakers face mounting budget pressures, those subsidies (and your coverage) could be at risk. If the government scales back its healthcare spending, your medical costs could skyrocket.
Here’s a closer look at the five ways the U.S. government funds healthcare. If you have health insurance, you’re almost certainly benefiting from one of them:
- Medicare, the government-run healthcare program for those 65 and older, covers 67 million Americans at a cost of more than $1 trillion annually. Approximately half of enrollees are covered through the traditional fee-for-service plan and the other half in privately managed Medicare Advantage plans.
- Medicaid and CHIP provide health coverage for around 80 million low-income and disabled Americans, including tens of millions of children. Even though 41 states have turned over their Medicaid programs over to privately managed care organizations, the cost remains public. Total Medicaid spending is $900 billion annually — the federal government pays 70% with states footing the rest.
- The online healthcare marketplace is for Americans whose employer doesn’t provide medical coverage or who are self-employed. This Affordable Care Act program offers federal subsidies to 92% of its 23 million enrollees, which help lower the cost of premiums and, for many, subsidize their out-of-pocket expenses. The Congressional Budget Office projects that a permanent extension of these subsidies, which are scheduled to end this year, would cost $383 billion over the next 10 years.
- Veterans and military families also benefit from government healthcare through TRICARE and VA Care, programs covering roughly 16 million individuals at a combined cost of $148 billion for the federal government annually.
- Employer-sponsored health insurance comes with a significant, yet often overlooked, government subsidy. For nearly 165 million American workers and their families, U.S. companies pay the majority of their health insurance premiums. However, those dollars are excluded from employees’ taxable income. This tax break, which originated during World War II and was formally codified in the 1950s, subsidizes workers at an annual government cost of approximately $300 billion. For a typical family of four, this translates into approximately $8,000 per year of added take-home pay.
With 91% of Americans receiving some form of government healthcare assistance, the idea that U.S. healthcare is predominantly “private” is an illusion.
Now, as the new administration searches for ways to rein in the growing federal deficit, all five of these programs (collectively funding healthcare for 9 in 10 Americans) will be in the crosshairs.
Twelve percent of the federal budget already goes toward debt interest payments, and this share is expected to rise sharply. Many of the bonds used to finance existing debt were issued back when interest rates were much lower. As those bonds mature and are refinanced at today’s higher rates, federal interest payments are projected to double within the next decade, according to the Congressional Budget Office.
With deficits mounting and borrowing costs soaring, most economists agree this trajectory is unsustainable. Lawmakers will eventually need to rein in spending, and healthcare subsidies will almost certainly be among the first targets. Policy experts predict Medicaid, which the House has already proposed cutting by $880 billion over the next decade, and ACA subsidies for out-of-pocket costs will likely be the first on the chopping block. But given the CBO’s projections, these cuts won’t be the last.
A Better Way: Three Solutions To Lower Healthcare Costs Without Cuts
Cutting some or all of these healthcare subsidies may seem like the simplest way to reduce the deficit. In reality, it merely shifts costs elsewhere, making medical care more expensive for everyone and increasing future government spending. Here’s why:
- Eliminating subsidies doesn’t eliminate the need for care. Under the Emergency Medical Treatment and Labor Act (EMTALA), hospitals must treat emergency patients regardless of their ability to pay. When millions lose insurance, more turn to ERs for medical care they can’t afford. The cost of that uncompensated care doesn’t vanish. It gets passed on to state governments, hospitals and privately insured patients through higher taxes, inflated hospital bills and rising insurance premiums.
- Delaying care drives up long-term costs. People who can’t afford doctor visits skip preventive care, screenings and early treatments. Manageable conditions like high blood pressure and diabetes then spiral into costly, life-threatening complications including heart attacks, strokes and kidney failures, which ultimately increase government spending.
The solution isn’t cutting coverage. It’s fixing the root causes of high healthcare costs. Here are three ways to achieve this:
1. Address The Obesity Epidemic
Obesity is a leading driver of diabetes, heart disease, stroke and breast cancer, which kill millions of Americans and cost the U.S. healthcare system hundreds of billions annually. Congress can take two immediate steps to reverse this crisis:
- Tax high-calorie, highly processed foods and use the revenue to subsidize healthier options, making nutritious food more affordable for all Americans.
- Cap the price of GLP-1 weight-loss medications (such as Ozempic and Wegovy) to match prices in peer nations, ensuring these highly effective treatments are accessible.
2. Enhance Chronic Disease Management With Technology
In every other industry, broad adoption of generative AI technology is already increasing quality while reducing costs. Healthcare could do the same by applying generative AI to more effectively manage chronic disease. According to the Centers for Disease Control and Prevention, improved control of these lifelong conditions could cut the frequency of heart attacks, strokes, kidney failures and cancers by up to 50%.
With swift and reasonable Food and Drug Administration approval, generative AI and wearable monitors would revolutionize how these conditions are managed, providing real-time updates on patient health and identifying when medications need adjustment. Instead of waiting months for their next in-office visit, patients with chronic diseases would receive continuous monitoring, preventing costly and life-threatening complications. Rather than restricting AI’s role in healthcare, Congress can streamline the FDA’s approval process and allocate National Institutes of Health funding to accelerate these advancements.
3. Reform Healthcare Payment Models
Under today’s fee-for-service system, doctors and hospitals are paid based on the how often they see patients for the same problem and the number of procedures performed. This approach rewards the volume of care, not the best and most effective treatments. A better alternative is a pay-for-value model like capitation, in which providers do best financially when they help keep patients healthy. To encourage participation, Congress should fund pilot programs and create financial incentives for insurers, doctors and hospitals willing to transition to this system. By aligning financial incentives with long-term health, this model would encourage doctors to prioritize prevention and effective chronic disease control, ultimately lowering medical costs by improving overall health.
The Time For Change Is Now
If Congress slashes healthcare subsidies this year, restoring them will be nearly impossible. Once the cuts take effect, the financial and political pressures driving them will only intensify, making reversal unlikely.
The voices shaping this debate can’t come solely from industry lobbyists. Elected officials need to hear from the 91% of Americans who rely on government healthcare assistance for some or all of their medical coverage. Now is the time to speak up.
HENRY KOTULA 