Only 11% of Federal Health Subsidies are in the Appropriations Bills

The Labor-HHS-Education appropriations bill is part of Congress’ hopefully final push to complete the Fiscal Year 2026 process. Annual appropriations fund agency operations but exclude many benefits programs and all tax preferences. 

What share of federal health subsidies are “discretionary” spending and therefore part of the annual appropriations bills? 

10.8 percent. 

According to the Congressional Budget Office’s January 2025 Spending Projections, by Budget Account, “mandatory” and “discretionary” health outlays for FY2026 were projected to be $1.911 trillion and $280 billion, respectively. Only 12.8% of that spending is discretionary. 

Among direct spending programs, Medicare ($1,000 billion, net), Medicaid ($695 billion), and the refundable portion of premium tax credits ($115 billion) dominate. The largest discretionary spending health accounts include Veterans Health Administration ($119 billion), National Institutes of Health ($48 billion), and the Defense health program ($40 billion).  

Granted, some accounts cover health and other services, particularly foreign affairs and domestic social services programs. Those accounts are excluded from the calculations here. In addition, legislation enacted since January 2025 could affect the calculations somewhat. 

Tax preferences are part of the story too. The Joint Committee on Taxation’s Estimates of Federal Tax Expenditures for Fiscal Years 2025-2029 counts $412 billion in health preferences against corporate and individual income taxes in 2026. $105 billion in subsidies for insurance purchased through health benefit exchanges and $240 billion for the exclusion of employer contributions for health care, health insurance premiums, and long-term care insurance premiums are the lion’s share of health tax expenditures. 

Of $2.6 trillion in federal health subsidies this year, only 10.8 percent flow through the annual appropriations bills. Congress could, in theory, manage the rest through budget reconciliation, but that is a difficult, infrequent, and one-party exercise. 

Congress cannot effectively coordinate, update, and otherwise improve federal health programs with the current process. 

A comprehensive congressional budget would let Congress more easily manage health programs among other spending and revenue policies. 

Kurt Couchman is senior fellow in fiscal policy at Americans for Prosperity.