The Affordable Care Act costs the federal government roughly $270 billion to $280 billion a year, with almost all of that going to two things: premium subsidies for people who buy insurance through the marketplaces, and the federal share of Medicaid expansion. A pair of dedicated taxes on higher-income households, plus penalties collected from large employers that don’t offer qualifying coverage, offset part of that spending. How much any individual taxpayer contributes depends on income, filing status, and whether they receive ACA benefits themselves.
The Two Big Spending Buckets
Marketplace premium tax credits are the ACA’s largest single expenditure. The IRS sends these credits directly to insurance companies to lower monthly premiums for enrollees. For 2026, the Congressional Budget Office projects about $112 billion in marketplace subsidy spending, down from roughly $140 billion in 2025.
The drop reflects the expiration of the enhanced premium tax credits created by the American Rescue Plan Act in 2021 and extended by the Inflation Reduction Act in 2022. Those enhancements ended after 2025.1Bipartisan Policy Center. Enhanced Premium Tax Credits: Who Benefits, How Much, and What Happens Next? Starting in 2026, credits are available only to households earning between 100 and 400 percent of the federal poverty level, and the required premium contribution at each income tier is higher than it was during the enhanced period.
Medicaid expansion is the second bucket. In states that adopted expansion, adults earning up to 138 percent of the federal poverty level can enroll regardless of age, family status, or health.2HealthCare.gov. Medicaid Expansion and What It Means for You The federal government pays 90 percent of the cost for this expansion population; states cover the remaining 10 percent.3Office of the Law Revision Counsel. 42 USC 1396d – Definitions That 90 percent match is well above the roughly 60 percent average for traditional Medicaid.
Federal spending on the Medicaid expansion population exceeds $158 billion a year based on the most recent available data. Because Washington bears 90 cents of every dollar, any change to that matching rate would move the ACA’s total cost sharply in either direction.
Administrative Costs
Running the federal marketplace itself is a small line by comparison. The fiscal year 2026 federal budget allocates about $2.1 billion for Federal Exchange operations, funded primarily through user fees charged to insurance companies that sell plans on the exchange rather than through direct appropriations.4HHS.gov. Fiscal Year 2026 Budget in Brief State-run exchanges use similar fee structures. Other administrative work — Medicaid expansion enrollment oversight, employer coverage enforcement, and tax processing — is embedded in the budgets of the IRS, CMS, and HHS.
The Taxes That Pay for It
Two ACA taxes remain in effect and generate most of the program’s dedicated revenue. Neither threshold is indexed for inflation, so both reach more taxpayers over time as wages and investment returns grow. The dollar amounts have been unchanged since 2013.
The Additional Medicare Tax adds 0.9 percent on wages, compensation, and self-employment income above $200,000 for single filers or $250,000 for married couples filing jointly. It applies only to earnings above those thresholds.5Internal Revenue Service. Questions and Answers for the Additional Medicare Tax
The Net Investment Income Tax imposes 3.8 percent on investment income — interest, dividends, capital gains, and rental income — for individuals whose modified adjusted gross income exceeds $200,000 (single) or $250,000 (married filing jointly).6Internal Revenue Service. Net Investment Income Tax Together, these two taxes generate tens of billions of dollars a year.
Large employers also contribute. Companies with 50 or more full-time employees must offer affordable coverage that meets minimum value standards or pay a penalty to the IRS when any full-time worker receives a marketplace premium credit.7Internal Revenue Service. Employer Shared Responsibility Provisions Those penalties are indexed to premium growth; for 2024 they ran $2,970 or $4,460 per affected employee depending on which rule the employer violated.
Revenue the ACA No Longer Collects
Four original revenue provisions have been repealed or zeroed out since 2017, which is why the remaining taxes now carry a larger share of the funding burden than the law’s drafters intended.
- The individual mandate penalty was reduced to $0 starting in 2019 by the Tax Cuts and Jobs Act. The legal requirement to maintain coverage is still on the books, but there is no federal financial consequence for going without it. A few states and the District of Columbia impose their own penalties.8Internal Revenue Service. Questions and Answers on the Individual Shared Responsibility Provision
- The 2.3 percent medical device excise tax was permanently repealed in December 2019.9Internal Revenue Service. Medical Device Excise Tax
- The annual health insurance provider fee was repealed effective after the 2020 fee year.10Internal Revenue Service. Affordable Care Act Tax Provisions
- The 40 percent excise tax on high-cost employer health plans, often called the “Cadillac tax,” was repeatedly delayed and then permanently repealed in December 2019 before it ever took effect.
If You Get a Subsidy, What You Might Owe at Tax Time
If you received advance premium tax credits during the year, you have to reconcile them when you file. The marketplace sends Form 1095-A showing what was paid on your behalf, and you use IRS Form 8962 to compare the advance credits you received to what your final annual income actually entitled you to.11Internal Revenue Service. Instructions for Form 8962 If you earned more than you estimated at enrollment, you likely got too much in advance and owe the difference back. If you earned less, you may get an additional credit on your return.
One change matters for 2026: there is no longer a cap on how much excess advance credit you have to repay.12CMS: Agent and Brokers FAQ. Are There Limits to How Much Excess Advance Payments of the Premium Tax Credit Consumers Must Pay Back In prior years, households earning below 400 percent of the poverty level had their repayment limited — a single filer under 200 percent of poverty in 2025, for instance, owed back no more than $375. For 2026, the full excess is owed regardless of income. If advance credits were paid on your behalf, you must file a return and attach Form 8962 even if you would not otherwise need to file.
The Net Picture and What Could Change It
Adding the major categories together — marketplace subsidies of roughly $112 billion projected for 2026, federal Medicaid expansion spending above $158 billion, and administrative costs — the ACA’s gross annual cost sits in the $270 billion to $280 billion range. Revenue from the Additional Medicare Tax, Net Investment Income Tax, and employer penalties offsets a portion, with the exact offset varying year to year.
Two forces are pulling in opposite directions. The repeal of four revenue provisions since 2017 has widened the gap between what the program spends and what it collects. The expiration of the enhanced premium tax credits at the end of 2025 pulls the spending side down in the near term. CBO estimated that permanently extending those enhanced credits would have increased the deficit by $358 billion over the 2026–2035 period, driven by roughly $471 billion in additional subsidy costs.
Congress considered several bills in late 2025 to extend the enhanced credits, but none cleared both chambers. Whether lawmakers reinstate the enhancements, adjust the 90 percent Medicaid expansion match, or add new revenue to replace what has been repealed will determine the ACA’s cost to taxpayers over the next decade far more than any operational detail of the program itself.