Combined federal and state expenditures for Medicaid accounted for about 16 percent of U.S. health care spending in calendar year (CY) 2019, the most recent year for which historical data are available. In comparison, Medicare accounted for about 21 percent and private insurance accounted for about 32 percent of U.S. health care spending (MACPAC 2021).
For certain types of care, Medicaid accounts for a larger portion of total U.S. spending than any other type of payer. National Health Expenditures (NHE) data compiled by the Centers for Medicare & Medicaid Services Office of the Actuary show that in CY 2019, Medicaid financed 29 percent of nursing home care and 58 percent of the category of other health, residential, and personal care that includes a variety of home and community-based services (MACPAC 2021). Another analysis that broke NHE data into different categories found that Medicaid accounted for 61 percent of all long-term services and supports (LTSS) spending in CY 2012, $134 billion out of a total $220 billion (O’Shaughnessy 2014). Medicaid pays for about one quarter (24 percent) of all spending on mental health services and about one fourth (24 percent) of all spending on substance abuse treatment (SAMHSA 2019).
Medicaid and CHIP have increased as a share of U.S. health care spending over time, along with Medicare and private insurance; in contrast, the out-of-pocket and other third-party payer shares of spending have decreased (MACPAC 2021). In addition, as health care has consumed a growing share of the nation’s economy, so have Medicaid and CHIP. Between CYs 1970 and 2019, total U.S. health care spending increased from 6.9 percent of gross domestic product (GDP) to 17.6 percent; over the same period, Medicaid and CHIP spending increased from 0.5 percent of GDP to 3.0 percent (CMS analyses of national health expenditures here).
Similarly, the programs represent a growing portion of the federal budget, having increased from 1.4 percent of federal outlays in FY 1970 to 7.3 percent in FY 2020; in comparison, Medicare increased from 3 percent of federal outlays to 11.7 percent (MACPAC 2021). Unlike Medicare, for which a substantial portion of federal spending is financed by dedicated revenue sources that include payroll taxes and enrollee premiums, federal spending for Medicaid and CHIP is financed by general revenues.
Medicaid accounts for a large share of state budgets, 37 percent of state and local government spending on health care, and almost 60 percent of spending from federal funds (table 5-4 in CMS analysis of national health expenditure data and Figure 8 in State expenditure report by the National Association of State Budget Officers). However, Medicaid’s share of state budgets varies substantially depending on how it is measured. Looking at total state budgets for state fiscal year (SFY) 2019 (including funds from all state and federal sources), Medicaid accounted for 28.7 percent of those budgets nationally. However, looking at the state-funded portion of state budgets for SFY 2019 (i.e., the portion that states must finance on their own through taxes and other means), Medicaid accounted for only 15.8 percent (MACStats table on state budgets).
Learn more from the following MACPAC resources:
Key statistics
Medicaid Enrollment and Spending
Annual Growth in Medicaid Enrollment and Spending
Total Medicaid Benefit Spending by State and Category
Medicaid Benefit Spending per Full-Year Equivalent Enrollee by State and Eligibility Group
Medicaid Benefit Spending by State, Eligibility Group, and Dually Eligible Status
Distribution of Medicaid Benefit Spending by Eligibility Group and Service Category
Medicaid Spending by State, Category, and Source of Funds
Medicaid as a Share of States’ Total Budgets and State-Funded Budgets
Historical and Projected National Health Expenditures by Payer
National Health Expenditures by Type and Payer
Additional background
Medicaid Spending in Context
Medicaid’s Share of State Budgets
Fact sheets
Medicaid Drug Spending Trends
Medicaid and CHIP in the Territories
Medicaid Home and Community-Based Services: Characteristics and Spending of High-Cost Users
Issue briefs
Changes in Spending and Use of Services after Becoming Dually Eligible for Medicare and Medicaid
The Impact of State Approaches to Medicaid Financing on Federal Medicaid Spending
Medicaid per Person Spending: Historical and Projected Trends Compared to Growth Factors in Per Capita Cap Proposals
Medicaid Spending for Prescription Drugs
In-depth analysis and policy recommendations
Trends in Medicaid Spending
Addressing Growth in Medicaid Spending: State Options
Mandatory and Optional Enrollees and Services in Medicaid
