Health Law Daily Wrap Up, GENERAL HEALTH CARE NEWS—CBO REPORTS: CBO releases a report with baseline projections for federal spending on health insurance subsidies from 2026 to 2036, (May 15, 2026)

By Donielle Tigay Stutland, J.D.

Medicare accounts for nearly half of all federal subsidies.

The Congressional Budget Office (CBO) released a report for Congress detailing provides the agency’s February 2026 baseline projections for federal spending on health insurance subsidies from 2026 to 2036. The report outlines the spending projections for the following programs: Medicare, Medicaid/CHIP, employment-based coverage, and Affordable Care Act marketplaces/Basic Health Program. The report also notes recent changes since the January 2025 baseline, including provisions of the 2025 reconciliation act (Public Law 119-21) that are scheduled to take effect over the next several years (CBO Report, May 11, 2026).

CBO’s projections indicate that Medicare accounts for nearly half of federal subsidies for health insurance and covers roughly 20 percent of the population. In CBO’s projections, enrollment in Medicare grows, driven by an increase in the population age 65 or older. However, enrollment in Medicaid and CHIP declines, mainly because of provisions of the 2025 reconciliation act (Public Law 119-21) that are scheduled to take effect over the next several years. The projected decline is from 82 million monthly average in 2026 to 73 million in 2036. CBO also projects that nearly half of the population has employment-based coverage, which accounts for about 20 percent of federal subsidies. This is estimated at 169 million people (47.7% of population), which is the largest source. The projections have Medicare as the fastest-growing component of mandatory outlays. Spending on Medicare is estimated to increase by 88 percent from 2026 to 2036.

Turning to spending, Medicare spending exceeds $16 trillion over the 2026–2036 period, in CBO’s February 2026 projections. Technical changes are the main driver of the projected increase in net mandatory outlays for Medicare. The main driver of the technical changes to CBO’s baseline projections since January 2025 will be an increase in projected Part D spending. Legislative and economic changes have comparatively small effects on CBO’s projections. Spending projections are lower than the January 2025 estimates, mainly due to the 2025 reconciliation act. Such legislative changes are estimated at around a $1.185 trillion reduction from 2026 to 2035, which is partially offset by technical changes reflecting underlying program growth.

The report projects enrollment falling for Medicaid, but spending rising due to higher per-enrollee costs, including: prescription drugs, home- and community-based services, and behavioral health services such as Applied Behavioral Analysis. Data from Monthly Treasury Statements, which track monthly Medicaid spending, indicate that fiscal year 2026 has seen two months with the greatest amount of Medicaid spending then on record.

CBO also projected that bids from private insurance plans that administer the Part D benefit anticipated a 35 percent increase in their annual per-enrollee costs in 2026—which was higher than CBO expected. CBO therefore increased its projection of Medicare spending on prescription drugs over the 2026–2035 period by $0.6 trillion. Part D spending per beneficiary in 2035 is now projected to exceed $4,000, up from less than $3,000 in the January 2025 baseline projections.

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