What health insurance really costs

I have to chuckle when I hear people ranting about government paid health care. Virtually all health insurance is paid by government- that’s is you and your fellow taxpayers and future generations since we are not actually footing the total bill today. The numbers below are only the spending for Americans under age 65.

Note what I highlighted in red. Employers get to deduct the cost of health benefits, employees receive the employer contribution tax-free and many employees in larger employers pay their share of the premiums on a pre-tax basis thus making that money also tax-free.

Federal Subsidies. In CBO and JCT’s projections, net federal subsidies (that is, the cost of all the subsidies minus the relevant taxes and penalties) in 2022 for insured people under age 65 are $997 billion, or 4.0 percent of gross domestic product (GDP). In 2032, that annual amount is projected to reach $1.6 trillion, or 4.3 percent of GDP. Over the 2022–2032 period, subsidies are projected to total $13.4 trillion.

  • Medicaid and the Children’s Health Insurance Program (CHIP) account for about 42 percent of the federal subsidies annually during the period;
  • Subsidies for employment-based coverage, about 37 percent;
  • Payments for Medicare enrollees under age 65, about 14 percent; and
  • Subsidies for coverage obtained through the marketplaces established by the Affordable Care Act or through the Basic Health Program, about 7 percent.

Source: Congressional Budget Office

In 2022 94% of enrollees in a ACA marketplace plan qualified for a subsidy, that left a median net premium of just $47 per month.


  1. I still don’t recognize the subsidy of non taxation. In government bookkeeping it is, sure. But just because a dollar flies by the IRS window that they didn’t extract tax from, doesn’t mean the lucky guy who picks it up got any subsidy from them.


  2. I’m assuming the 37% for people under 65 is the amount of taxes forgiven on both employer and employee side. I don’t consider non taxation as a subsidy but in Washington and state capitals it is.


      1. It is, and we take it for granted. I take advantage of the HSA to pay for my health-related expenses and save about 20 % versus paying with after-tax dollars.


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