Federal Healthcare Costs on Track to Reach $3.1 Trillion by 2036
Federal healthcare spending is on track to reach $3.1 trillion by 2036 — approximately double what it costs today — according to the most recent projections from the Congressional Budget Office (CBO). Federal healthcare programs are among the fastest-growing drivers of federal spending, and their continued growth will put significant upward pressure on the national debt. Here are five key takeaways regarding healthcare from the report.
1. Healthcare spending will nearly double over the next decade.
Federal healthcare spending, which includes Medicare, Medicaid, the Children’s Healthcare Insurance Program (CHIP), the premium tax credit (PTC), and other related spending, is expected to grow 63 percent in 10 years — from $1.9 trillion this year to $3.1 trillion by 2036. By 2036, those programs will account for 44 percent of mandatory spending. Notably, this year’s projections are more than last year’s estimates for the 2026–2035 period by $182 billion.
2. Net Medicare spending will surpass $1 trillion this year.
Medicare is the largest component of federal healthcare spending and is projected to reach $1.1 trillion this year, or 3.3 percent of gross domestic product (GDP). It is the first year Medicare (net offsetting receipts and premiums) will cross the trillion-dollar threshold.
3. Medicare’s trust fund will be depleted by 2040.
The Hospital Insurance (HI) Trust Fund, which finances Medicare, is projected to be depleted by 2040, according to CBO. That is 12 years sooner than last year's projections, yet it is more optimistic than the most recent Medicare Trustees Report, which projects the trust fund to be depleted by 2033. The earlier depletion date is driven by lower-than-expected income due to three factors: a new, temporary tax deduction for those age 65 and older under the OBBBA, lower projected wages and salaries (which reduce payroll tax revenues), and less interest income due to smaller trust fund balances. Higher projected spending per enrollee also contributed, though to a lesser degree. The higher spending is driven by higher anticipated costs in Medicare Part A fee-for-service and higher-than-expected Medicare Advantage plan bids for 2026.
4. Legislative changes are expected to slow growth in Medicaid, CHIP, and premium tax credits.
Spending on Medicaid, CHIP, and premium tax credits is projected to be lower over the next decade relative to last year's estimates, largely due to legislative changes from the One Big Beautiful Bill Act (OBBBA) and the expiration of enhanced premium tax credits. Medicaid and CHIP spending is expected to reach $733 billion this year — up 6 percent from last year — but growth will slow in later years as significant changes take effect starting in 2028. Premium tax credit spending is projected to fall 20 percent this year compared to last year's estimates, followed by an additional 17 percent decline from 2026 to 2027, before year-over-year changes stabilize. Both Medicaid and PTC costs will grow less each year over the decade compared to the last 10 years, on average. Despite those reductions relative to prior projections, combined spending on those programs will still total $9.7 trillion from 2027 to 2036.
5. Rising costs per beneficiary are a key driver of long-term spending growth.
Among the major federal healthcare programs, Medicare is projected to grow the most from 2026 to 2036 at 88 percent, compared to 39 percent for Medicaid and 31 percent for the PTC. All three programs will be affected by inflation, but differences in their spending trajectories reflect two additional factors: changes in the number of beneficiaries and growth in real spending per beneficiary.
On the beneficiary side, Medicare enrollment is expected to grow as the population ages, adding 20 percentage points to its spending growth. By contrast, legislative changes made in 2025 will reduce enrollment in Medicaid and PTCs — trimming 14 percentage points from Medicaid's projected growth and 30 percentage points from PTC’s growth over the decade.
The more significant long-run factor, however, is the cost of caring for each beneficiary. Healthcare spending per capita is projected to grow faster than GDP per capita over the next 10 years — a dynamic that will affect all three programs. That excess cost growth accounts for 41 percentage points of Medicare's spending increase, 26 percentage points for PTCs, and 18 percentage points for Medicaid. Put differently, even if enrollment held flat, healthcare would still be getting more expensive faster than the broader economy; that trend is a central driver of the country's long-term fiscal challenge.
CBO's latest projections make clear that healthcare spending is one of the most consequential fiscal challenges facing the United States. As costs continue to grow faster than the economy, federal healthcare programs will claim an ever-larger share of the budget and continue to add to an already unsustainable debt trajectory. Improving America’s long-term fiscal health will require addressing the underlying drivers of healthcare cost growth, making the system more affordable and efficient.
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Further Reading
National Debt Projected to Hit 175% GDP; Interest Totals $99 Trillion
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Quarterly Treasury Refunding Statement: Higher Borrowing Compared to Last Year
Key highlights from the most recent Quarterly Refunding include an increase in anticipated borrowing of $249 billion compared to the same period in the previous year.
The Federal Government Has Borrowed Trillions. Who Owns All that Debt?
Most federal debt is owed to domestic holders, but foreign ownership is much higher now than it was about 50 years ago.