	Introduction

Public and private health care spending is growing due to increased enrollment in health insurance, demographic changes of an aging society, and the expansion of government programs, among other reasons. While much attention is being paid to the budgetary cost of outlays from the largest federally funded health programs (Medicare and Medicaid), the implicit subsidies in the Internal Revenue Code for the provision of private and publicly provided health care are sometimes overlooked in public debates. These subsidies come in the form of tax expenditures , or provisions that confer preferential tax status to certain forms of income, and result in revenue foregone. This report analyzes these tax expenditures together at the budget function level, rather than focusing on the size of any single provision. For more information on individual tax expenditures, see CRS Committee Print CP10001, Tax Expenditures: Compendium of Background Material on Individual Provisions — A Committee Print Prepared for the Senate Committee on the Budget , by [author name scrubbed] et al. For broader analysis of tax expenditures and comparisons of different categories of tax expenditures, by budget function, see CRS Report R44012, Tax Expenditures: Overview and Analysis , by [author name scrubbed]. The largest tax expenditure in Table 1 is the tax exclusion for employer-sponsored insurance (ESI). From FY2015 to FY2019, JCT estimates that the annual tax expenditure amount for the ESI tax exclusion will increase from $145.5 billion to $169.4 billion. The second largest health tax expenditure value is for subsidies for insurance purchased in the exchanges (the advance premium tax credits, or APTCs, not the cost-sharing subsidies). From FY2015 to FY2019, JCT estimates that the annual tax expenditure amount for APTCs will increase from $29.6 billion to $84.8 billion. The Value of Health-Related Tax Expenditures Over Time

As shown in Figure 1 , after adjusting for inflation, health-related tax expenditures have increased in value over time (as represented, in 2014 constant dollars, by the dotted line in Figure 1 ). From FY1974 to FY2014, the annual tax expenditure value for health-related provisions has increased by 11.5% (nominal dollars) and 7.5% (real dollars), on average. In current, or nominal, dollars, the annual value of health tax expenditures are estimated to increase from $210.4 billion in FY2015 to $296.2 billion in FY2019. Before FY2015, JCT identified Medicare-related tax expenditures as the value of benefits in excess of insurance payments, not the total value of Medicare benefits received. Health-Related Tax Expenditures Relative to Total Revenue

Health-related tax expenditures have also increased from a value relative to 1.9% of total revenue collected in FY1974 to 8.4% in FY2014, as shown in Figure 2 . In other words, the value of health-related tax expenditures has generally increased at a rate greater than the growth of total revenue collections. Comparing Health-Related Tax Expenditures to Health Outlays

 Figure 3 displays discretionary and mandatory outlays, as organized under OMB's health budget function, and health-related tax expenditures as a share of gross domestic product (GDP) from FY1974 to FY2014. As shown in Figure 3 , the values of health-related tax expenditures historically exceeded health discretionary outlays, but were still much less than health mandatory outlays (which primarily consist of funding for Medicare, Medicaid, and the Children's Health Insurance Program).
Public and private health care spending is growing due to increased enrollment in health insurance, demographic changes of an aging society, and the expansion of government programs, among other reasons. While much attention is being paid to the budgetary cost of outlays from the largest federally funded health programs (Medicare, Medicaid, and the Children's Health Insurance Program), the implicit subsidies in the Internal Revenue Code for the provision of private- and publicly-provided health insurance are sometimes less prominent in public debates. These subsidies are tax expenditures, or provisions that confer preferential tax status to certain forms of income, and result in revenue foregone.
This report primarily analyzes health-related tax expenditures, or tax expenditures associated with health and Medicare. As of FY2015, JCT identified 14 health tax expenditures. From FY1974 to FY2014, JCT had been identifying three Medicare-related tax expenditures based on the tax-excluded value of benefits in excess of insurance payments (not the total value of benefits).
The single largest tax expenditure is the tax exclusion for employer-sponsored insurance and health coverage (ESI). From FY2015 to FY2019, JCT estimates that the annual tax expenditure amount for the ESI tax exclusion will increase from $145.5 billion to $169.4 billion. The second largest health tax expenditure is for subsidies for insurance purchased in the exchanges (i.e., the advance premium tax credits, or APTCs). From FY2015 to FY2019, JCT estimates that the annual tax expenditure amount for APTCs will increase from $29.6 billion to $84.8 billion.
Congressional interest in health-related tax expenditures could be related to the value of health-related tax expenditures over time, their value relative to total revenue collected, and how they compare to the value of discretionary and mandatory outlays for health.
Health-related tax expenditures have increased in value over time, after adjusting for inflation in constant 2014 dollars. From FY1974 to FY2014, real health-related tax expenditures have increased, on average, at an annual rate of 7.5%. Looking forward, the nominal value of health tax expenditures is estimated to increase from $210.4 billion in FY2015 to $296.2 billion in FY2019.
Health-related tax expenditures have also increased in value relative to total revenue collected, from 1.9% in FY1974 to 8.4% in FY2014. In other words, health-related tax expenditures have generally increased at a rate greater than the growth of total revenue collections.
Over this FY1974 to FY2014 period, the value of health-related tax expenditures as a percent of GDP exceeded health discretionary outlays, but were still much less than health mandatory outlays according to analyses of Office and Management and Budget (OMB) data on health and Medicare spending.
This report analyzes these provisions at the level of a budget function, rather than focusing any single provision. For more information on individual health tax expenditures, see CRS Committee Print CP10001, Tax Expenditures: Compendium of Background Material on Individual Provisions—A Committee Print Prepared for the Senate Committee on the Budget, by [author name scrubbed] et al. For broader analysis of tax expenditures and comparisons of different categories of tax expenditures, by budget function, see CRS Report R44012, Tax Expenditures: Overview and Analysis, by [author name scrubbed].