Subsidies. Love ’em or hate them, they dominated the news during the Affordable Care Act’s sign-up season, and their reduction is now hitting many enrollees in the pocketbook.
While lawmakers continue to disagree on a way forward, and the politics of affordability keeps the issue front and center, it would be understandable to think these are the only taxpayer-funded health insurance subsidies in the U.S. system.
But that would be wrong.
“The vast majority of people with health insurance get some kind of federal subsidy for it, from Medicaid to Medicare to the ACA to employer-sponsored insurance,” said Larry Levitt, executive vice president for health policy at KFF, a health information nonprofit that includes KFF Health News.
These broad taxpayer supports are rarely discussed, though, as they apply to work-based coverage. So, let’s take a look.
Adding Up the Tax Breaks
Nearly half of the more than $1.1 trillion in annual spending on Medicare, the second-largest program in the federal budget behind Social Security, comes from general federal funds. The rest comes from payroll taxes and the monthly premiums paid by enrollees, who number more than 66 million.
Medicaid — the nation’s largest health insurer, covering more than 70 million low-income people — costs more than $918 billion annually. It’s jointly financed by the federal government (65%) and states (35%).
For both programs, expenses are partially funded with taxpayer dollars. A less obvious form of federal support comes through employer-sponsored health coverage. Here, the impact on the federal bottom line is less visible, as hundreds of billions of dollars never reach the U.S. Treasury because it takes the form of tax breaks for employers and workers.
“It’s a world apart from Medicare, Medicaid, and Obamacare — from the government writing checks to people,” said Michael Cannon, director of health policy studies at the libertarian Cato Institute.
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Job-based insurance provides coverage for at least 154 million peo …