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The government shutdown is entering its fifth week with seemingly little progress. House Republicans have passed a continuing resolution to fund the government through November 21. But Senate Democrats are blocking the bill, insisting that Republicans first agree to extend “temporary” enhanced Affordable Care Act (ACA) subsidies. Democrats describe the expiration of the subsidies, first enacted during the depths of the COVID pandemic and then extended by the Inflation Reduction Act, as a “health care crisis.”
Setting aside the debate over whether a lapse of subsidies that Democratic lawmakers deemed temporary qualifies as a crisis, there is indeed a looming health care crisis.
The Plot
As evidenced by today’s plot, the crisis that merits attention is the outsize effect health care spending will have on the future federal budget. 1
Our last plot showed that both past and future federal spending growth is driven by mandatory programs. That category of spending includes Social Security, Medicare, Medicaid, federal employees’ pensions, veterans’ compensation, the Supplemental Nutritional Assistance Program (SNAP, formerly called food stamps), refundable tax credits, and a host of smaller entitlements. Since 1995, mandatory spending has risen by $6,800 per person (in inflation-adjusted 2025 dollars). It is projected to rise by another $8,400 over the next thirty years. Discretionary spending—think national defense, federal employee compensation, and most agency spending—grew by just $1,500 per person from 1995 to 2024 and will rise by $1,400 per person through 2055.
But our previous plot omitted an important detail: Nearly half of the growth in mandatory spending came from just one source—health care.
From 1995 to 2024, Medicare, Medicaid, and the Affordable Care Act subsidies grew by $3,300 per person, accounting for 45 percent of the total growth in mandatory spending.2 The next thirty years look even worse. Health care spending will rise by $5,300 per person. Social Security will grow by $3,600 per person. All other mandatory program spending is projected to fall by $500 per person.
In short, even when discretionary spending is included, more than half of the growth in non-interest federal spending will come from just the three big federal health care programs.
The Point
The health care crisis has been a long time coming. It isn’t merely the result of aging baby boomers or other demographic trends. Spending per recipient continues to rise much faster than inflation. Compounding the problem, Congress keeps expanding federal health subsidies, often to more Americans with higher incomes.
The “temporary” enhanced ACA subsidies are the most recent example. Under the original ACA, premium subsidies were limited to families with incomes under 400 percent of the federal poverty line.3 In 2021, the Biden administration temporarily removed that cap as part of the COVID-era American Rescue Plan Act’s enhanced ACA subsidies. That meant a family earning over $200,000 per year would be eligible for the ACA’s premium subsidies, but only for two years, as the subsidies were set to expire after 2022. Before they could expire, however, Democrats extended the subsidies for another three years in the Inflation Reduction Act (IRA).
Why didn’t the Democrats just make the subsidies permanent? Likely the cost. Proponents of the IRA were eager to claim that the act would reduce deficits over the ten-year budget window. Permanently extending the enhanced tax credits would have ruined that talking point. A permanent extension would have increased the cost of that bill by $183.8 billion over ten years.4 That cost would have been equivalent to more than twice the IRA’s projected deficit reductions, according to the Congressional Budget Office (CBO) official score.5
The estimated cost has only grown. CBO now projects that permanently extending the enhanced subsidies would add $350 billion to federal deficits over the next decade, which would further deepen the nation’s long-term health care crisis.
Learn More
Are there solutions to rising health care costs that could lessen the strain they place on the federal budget? Our Choices for All Project explores various reforms that could reduce costs while expanding options for all Americans. And the Hoover Institution’s Fiscal Policy Initiative and its Healthcare Policy Working Group are developing rigorous, research-based policy solutions to meet the nation’s health and budget challenges.
Historical budget data are from the Office of Management and Budget’s Historical Tables (Tables 8.1 and 8.5). Budget projections and economic data are from the Congressional Budget Office (CBO), The Long-Term Budget Outlook: 2025 to 2055. We adjust CBO’s projections to account for changes due to the One Big, Beautiful Bill Act (OBBBA) using CBO’s July 21, 2025 cost estimate. We use the GDP price index (as reported by CBO) to adjust for inflation.
Social Security spending accounted for 29 percent of the growth in mandatory spending.
In 2025, 400 percent of the federal poverty line was $62,600 for an individual and $128,600 for a family of four.
CBO’s official IRA score projected that the temporary subsidies would increase ten-year deficits by $64.1 billion (outlays would rise by $32.8 billion and revenue would fall by $31.2 billion). In a separate analysis, CBO estimated that the ten-year cost of a permanent extension would be $247.9 billion.
Proponents of the IRA may note that CBO’s $90 billion deficit-reduction estimate didn’t include $204 billion in increased revenue from the IRA’s additional IRS funding, and that after counting that revenue the IRA would still have been deficit reducing even if the ACA subsidies were made permanent. This debate, however, is largely academic, as the IRA’s energy tax credits cost at least twice as much as the CBO had projected.
Tom Church is a policy fellow at the Hoover Institution. He studies health care policy, entitlement reform, income inequality, poverty, and the federal budget. He is co-author of “Choices for All,” a set of commonsense health care reforms.
Daniel Heil is a policy fellow at the Hoover Institution. He studies the federal budget, tax policy, and federal antipoverty programs. During the 2016 presidential campaign, he served as economic policy adviser to former Florida governor Jeb Bush.