Combined federal and state expenditures for Medicaid accounted for about 16 percent of U.S. health care spending in calendar year (CY) 2014, the most recent year for which historical data are available. In comparison, Medicare accounted for about 20 percent and private insurance accounted for about 33 percent of U.S. health care spending (CMS 2015).
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 2014, Medicaid financed 32 percent of nursing home care and 56 percent of the category of other health, residential, and personal care that includes a variety of home and community-based services (table 4 in CMS 2015). 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 more than one quarter (27 percent) of all spending on mental health services and about one fifth (21 percent) of all spending on substance abuse treatment (SAMHSA 2013).
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 (table 3 in CMS 2015). In addition, as health care has consumed a growing share of the nation’s economy, so have Medicaid and CHIP. Between CY 1970 and CY 2015, total U.S. health care spending increased from 6.9 percent of gross domestic product (GDP) to 17.8 percent; over the same period, Medicaid and CHIP spending increased from 0.5 percent of GDP to 3.1 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 9.5 percent in FY 2015; in comparison, Medicare increased from 3 percent of federal outlays to 14.6 percent. (See analyses by the Office of Management and Budget, tables 8.1 and 8.5 2016.) 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, about 40 percent of state and local government spending on health care, and nearly half of state spending from federal funds (table 1 in CMS analysis of national health expenditure data and figure 8 in analysis 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) 2014 (including funds from all state and federal sources), Medicaid accounted for 25.6 percent of those budgets nationally. However, looking at the state-funded portion of state budgets for SFY 2014 (i.e., the portion that states must finance on their own through taxes and other means), Medicaid accounted for only 15.3 percent (MACStats table on state budgets).
For more information on Medicaid spending, see the following: