Expenditures by function > Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations > PART II > 2021 Government 10-K

Expenditures by function

Published on Mon, May 17, 2021 9:00AM PDT | Updated Mon, May 17, 2021 9:07AM PDT

Expenditures by function45

We review expenditures in this MD&A in two ways, by function and by reporting segment. This section discusses expenditures by function.

Fiscal year 2018 compared with fiscal year 2017

 

 

 

2018

 

 

2017

 

 

Changes 2

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(In billions, except percentages)

 

Total

 

Federal 1

 

State and

Local

 

 

Total

 

Federal 1

 

State and

Local

 

 

Total

 

Federal 1

 

State and

Local

 

Total

 

Federal 1

 

State and

Local

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Transfer payments to individuals and

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

subsidies

 

$

2,982

 

$

2,206

 

 

$

776

 

 

$

2,936

 

$

2,202

 

 

$

734

 

 

$

46

 

$

4

 

 

$

42

 

2%

 

—%

 

 

 

6%

Personnel and compensation

 

 

1,691

 

 

587

 

 

 

1,104

 

 

 

1,623

 

 

573

 

 

 

1,050

 

 

 

68

 

 

14

 

 

 

54

 

4%

 

2%

 

 

 

5%

Payments to others for goods and

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

services

 

 

705

 

 

143

 

 

 

562

 

 

 

674

 

 

120

 

 

 

554

 

 

 

31

 

 

23

 

 

 

8

 

5%

 

19%

 

 

 

1%

Capital expenditures

 

 

559

 

 

180

 

 

 

379

 

 

 

534

 

 

172

 

 

 

362

 

 

 

25

 

 

8

 

 

 

17

 

5%

 

5%

 

 

 

5%

Net interest paid

 

 

395

 

 

325

 

 

 

70

 

 

 

333

 

 

262

 

 

 

71

 

 

 

61

 

 

62

 

 

 

(1)

 

18%

 

24%

 

 

 

(1)%

Other

 

 

(40)

 

 

(40)

 

 

 

 

 

 

(31)

 

 

(31)

 

 

 

 

 

 

(8

)

 

(8

)

 

 

 

25%

 

25%

 

 

 

—%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Total expenditures

 

$

6,292

 

$

3,401

 

 

$

2,891

 

 

$

6,069

 

$

3,298

 

 

$

2,771

 

 

$

223

 

$

103

 

 

$

120

 

4%

 

3%

 

 

 

4%

 

Estimated impact of inflation on total expenditures

 

 

 

 

 

 

 

 

 

 

 

 

 

$

145

 

$

79

 

 

$

66

 

2%

 

2%

 

 

 

2%

 

Estimated impact of population growth on total expenditures

 

 

 

 

 

 

 

 

 

 

 

 

 

 

32

 

 

17

 

 

 

15

 

1%

 

1%

 

 

 

1%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

1 Federal expenditures exclude transfers to state and local governments. See separate schedule and discussion of intergovernmental transfers at Note 23 – Intergovernmental transfers (Part II, Item 8 within this annual report).

2 Key changes are highlighted in gray in the table above and are discussed in the sections below.

2017 to 2018 | State and local transfer payments to individuals and subsidies

The $42 billion growth in state and local transfer payments to individuals and subsidies was driven primarily by a $35 billion or 6% increase in Medicaid and CHIP payments. This increase reflects:

  • 0.7 million or 1% growth in person-year equivalent enrollment, driven primarily by increases in aged enrollees, children enrollees, and adult enrollees of 0.2 million each, or 3%, 1%, and 1%, respectively; and
  • a $74 or 1% increase in annual per enrollee spending, driven by a $420 or 7% increase in per enrollee spending for the expansion adults (adults made newly eligible for Medicaid under the ACA beginning in 2014), offset in part by a $324 or 2% decrease in per enrollee spending for the aged, the second most expensive group served.46

The majority of the growth in Medicaid benefit expenditures was in the form of capitation payments, which are payments made to Medicaid healthcare providers at a set amount for each enrolled person assigned to them during the period, based on average expected healthcare utilization for that enrollee, regardless of whether the enrollee seeks care.

2017 to 2018 | State and local personnel and compensation

The $54 billion increase in state and local personnel and compensation payments reflects growth of $40 billion or 5% in compensation for current employees and $14 billion or 4% in compensation for former employees.

Current employees

The 5% increase in compensation for current employees was driven by a 3%** or $1.27** per hour increase in compensation (excluding pension), including 3%** growth in wages and salaries and 3%** growth in health insurance benefits. In addition, there was a 1%** increase in the number of state and local government full-time equivalent employees, including a 2%** increase in full-time equivalent non-education employees during this period.

Compensation for current employees is reported net of current employee contributions to their own pensions. We count the employer portion of pension contributions as expenditures when paid out to the former employees and therefore include them in compensation for former employees below. Pension contributions made by current employees to their own pensions fell 1% during this period. Contributions made by state and local government employers on behalf of their employees grew 7% during this period, primarily related to defined benefit plans, which made up 93% of total employer pension contributions in 2018 and increased 7% during the period.

Former employees

The 4% increase in compensation for former employees was driven by a 3% increase in the number of retirees receiving periodic benefits and a 2% increase in the average benefit payment per recipient. The increase in number of retirees receiving benefits may be driven in part by our aging population; our population aged 65 years and older grew by 3% during this period.

2017 to 2018 | Federal payments to others for goods and services

The $23 billion increase in federal payments to others for goods and services was driven by a $19 billion or 77% increase in net costs associated with the federal government having taken conservatorship over Fannie Mae and Freddie Mac during the financial crisis and a $7 billion or 93% increase in expenditures related to re-estimates of costs of rural housing insurance, offset in part by a $3 billion or 34% decrease in costs of Federal Housing Administration programs.

2017 to 2018 | Federal net interest paid

The $62 billion or 24% increase in federal net interest paid was driven by a $982 billion or 7% increase in federal marketable Treasury securities outstanding along with increased interest rates. The 10-year Treasury rate increased 0.58ppt or 25% during this period.

Fiscal year 2018 compared with fiscal year 2013

 

 

2018

 

 

2013

 

 

Changes 2

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(In billions, except percentages)

 

Total

 

Federal 1

 

State and

Local

 

 

Total

 

Federal 1

 

State and

Local

 

 

Total

 

Federal 1

 

State and

Local

 

Total

 

Federal 1

 

State and

Local

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Transfer payments to individuals and

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

subsidies

 

$

2,982

 

$

2,206

 

 

$

776

 

 

$

2,447

 

$

1,881

 

 

$

566

 

 

$

535

 

$

325

 

 

$

210

 

22%

 

17%

 

 

 

37%

Personnel and compensation

 

 

1,691

 

 

587

 

 

 

1,104

 

 

 

1,434

 

 

534

 

 

 

900

 

 

 

257

 

 

53

 

 

 

204

 

18%

 

10%

 

 

 

23%

Payments to others for goods and services

 

 

705

 

 

143

 

 

 

562

 

 

 

646

 

 

130

 

 

 

516

 

 

 

59

 

 

13

 

 

 

46

 

9%

 

10%

 

 

 

9%

Capital expenditures

 

 

559

 

 

180

 

 

 

379

 

 

 

493

 

 

173

 

 

 

320

 

 

 

66

 

 

7

 

 

 

59

 

13%

 

4%

 

 

 

18%

Net interest paid

 

 

395

 

 

325

 

 

 

70

 

 

 

295

 

 

221

 

 

 

74

 

 

 

100

 

 

104

 

 

 

(4)

 

34%

 

47%

 

 

 

(5)%

Other

 

 

(40)

 

 

(40)

 

 

 

 

 

 

(35)

 

 

(35)

 

 

 

 

 

 

(5)

 

 

(5)

 

 

 

 

14%

 

14%

 

 

 

—%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Total expenditures

 

$

6,292

 

$

3,401

 

 

$

2,891

 

 

$

5,280

 

$

2,904

 

 

$

2,376

 

 

$

1,012

 

$

497

 

 

$

515

 

19%

 

17%

 

 

 

22%

 

Estimated impact of inflation on total expenditures

 

 

 

 

 

 

 

 

 

 

 

 

 

$

398

 

$

219

 

 

$

179

 

8%

 

8%

 

 

 

8%

 

Estimated impact of population growth on total expenditures

 

 

 

 

 

 

 

 

 

 

 

 

 

 

180

 

 

99

 

 

 

81

 

3%

 

3%

 

 

 

3%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

1 Federal expenditures exclude transfers to state and local governments. See separate schedule and discussion of intergovernmental transfers at Note 23 – Intergovernmental transfers (Part II, Item 8 within this annual report).

2 Key changes are highlighted in gray in the table above and are discussed in the sections below.

2013 to 2018 | Federal transfer payments to individuals and subsidies

The $325 billion increase in federal transfer payments to individuals and subsidies reflects increases across all major programs except unemployment insurance, SNAP, and SSI. The most significant changes are discussed below.

Social Security

Social Security payments increased $174 billion or 22%, driven by:

  • a 5.0 million person or 9% increase in the number of OASDI recipients, including an increase of 5.7 million recipients or 12% for OASI, offset in part by a decrease of 0.7 million recipients or 6% for DI; and
  • a 10% increase in the average monthly benefit payment, including increases of $143 or 12% for OASI and $84 or 9% for DI.

The average OASI recipient age increased from 71 to 72 during these periods, while the average DI recipient age increased 7%, from 46 years old in 2013 to 49 years old in 2018. The population aged 65 years and older, the cohort we track that is most likely to be receiving OASI benefits, increased 17%.

Medicare

Medicare payments (net of premiums received) increased $124 billion or 22%, driven by a 7.7 million* person or 15%* increase in Medicare enrollees and a 10%* increase in average costs per beneficiary (net of premiums received). Medicare premiums received increased $31 billion or 45% during this period.

Our population aged 65 years and older (one eligibility requirement for Medicare) grew by 17% during this period. General medical care cost inflation was 14%, with prices of medical commodities inflating 14%, medical services inflating 14%, and hospitals inflating 24%.47

2013 to 2018 | State and local transfer payments to individuals and subsidies

The $210 billion growth in state and local transfer payments to individuals and subsidies was driven primarily by a $186 billion or 44% increase in Medicaid and CHIP payments. This increase reflects:

  • 15.2 million or 26% growth in person-year equivalent enrollment, including growth of 0.6 million adults (4% growth), 0.6 million aged enrollees (11% growth), and 12.2 million enrollees newly eligible for Medicaid through the Affordable Care Act; and
  • a $1,048 or 15% increase in annual per enrollee spending, driven by a $3,046 or 18% increase in per enrollee spending for the disabled, the most expensive group served, offset in part by a $748 or 5% decrease in per enrollee spending for the aged, the second most expensive group served.46

The majority of the growth in Medicaid benefit expenditures was in the form of capitation payments.

2013 to 2018 | State and local personnel and compensation

The $204 billion increase in state and local personnel and compensation payments comprised growth of $137 billion or 22% in compensation for current employees and $67 billion or 25% in compensation for former employees.

Current employees

The 22% increase in compensation for current employees was driven by a 14%** or $5.33** per hour increase in compensation (excluding pension), including 13%** growth in wages and salaries and 16%** growth in health insurance benefits. In addition, there was a 3%** increase in the number of state and local government full-time equivalent employees, including a 3%** increase in full-time equivalent education employees during this period.

Pension contributions made by current employees to their own pensions grew 21% during this period. Contributions made by state and local government employers on behalf of their employees grew 51% during this period, primarily related to defined benefit plans, which made up 93% of total employer pension contributions in 2018 and increased 53% during the period.

Former employees

The 25% increase in compensation for former employees was driven by a 19% increase in the number of retirees receiving periodic benefits and a 9% increase in the average benefit payment per recipient. The increase in number of retirees receiving benefits may be driven in part by our aging population; our population aged 65 years and older grew by 17% during this period.

2013 to 2018 | Federal net interest paid

The $104 billion or 47% increase in federal net interest paid was driven by a $2,573 billion or 22% increase in federal marketable Treasury securities outstanding along with along with increased interest rates. The 10-year Treasury rate increased 0.56ppt or 24% during this period.

Fiscal year 2018 compared with fiscal year 2008

 

 

2018

 

 

2008

 

 

Changes 2

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(In billions, except percentages)

 

Total

 

Federal 1

 

State and

Local

 

 

Total

 

Federal 1

 

State and

Local

 

 

Total

 

Federal 1

 

State and

Local

 

Total

 

Federal 1

 

State and

Local

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Transfer payments to individuals and

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

subsidies

 

$

2,982

 

$

2,206

 

 

$

776

 

 

$

1,847

 

$

1,411

 

 

$

436

 

 

$

1,135

 

$

795

 

 

$

340

 

61%

 

56%

 

 

 

78%

Personnel and compensation

 

 

1,691

 

 

587

 

 

 

1,104

 

 

 

1,304

 

 

472

 

 

 

832

 

 

 

387

 

 

115

 

 

 

272

 

30%

 

24%

 

 

 

33%

Payments to others for goods and services

 

 

705

 

 

143

 

 

 

562

 

 

 

720

 

 

258

 

 

 

462

 

 

 

(15)

 

 

(115)

 

 

 

100

 

(2)%

 

(45)%

 

 

 

22%

Capital expenditures

 

 

559

 

 

180

 

 

 

379

 

 

 

511

 

 

161

 

 

 

350

 

 

 

48

 

 

19

 

 

 

29

 

9%

 

12%

 

 

 

8%

Net interest paid

 

 

395

 

 

325

 

 

 

70

 

 

 

272

 

 

252

 

 

 

20

 

 

 

123

 

 

73

 

 

 

50

 

45%

 

29%

 

 

 

250%

Other

 

 

(40)

 

 

(40)

 

 

 

 

 

 

(4)

 

 

(4)

 

 

 

 

 

 

(36)

 

 

(36)

 

 

 

 

900%

 

900%

 

 

 

—%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Total expenditures

 

$

6,292

 

$

3,401

 

 

$

2,891

 

 

$

4,650

 

$

2,550

 

 

$

2,100

 

 

$

1,642

 

$

851

 

 

$

791

 

35%

 

33%

 

 

 

38%

 

Estimated impact of inflation on total expenditures

 

 

 

 

 

 

 

 

 

 

 

 

 

$

766

 

$

420

 

 

$

346

 

16%

 

16%

 

 

 

16%

 

Estimated impact of population growth on total expenditures

 

 

 

 

 

 

 

 

 

 

 

 

 

 

348

 

 

191

 

 

 

157

 

7%

 

7%

 

 

 

7%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

1 Federal expenditures exclude transfers to state and local governments. See separate schedule and discussion of intergovernmental transfers at Note 23 – Intergovernmental transfers (Part II, Item 8 within this annual report).

2 Key changes are highlighted in gray in the table above and are discussed in the sections below.

2008 to 2018 | Federal transfer payments to individuals and subsidies

The $795 billion increase in federal transfer payments to individuals and subsidies reflects increases across all major programs except unemployment insurance. The most significant changes are discussed below.

Social Security

Social Security payments increased $370 billion or 61%, driven by:

  • a 12.0 million person or 24% increase in the number of OASDI recipients, including increases of 10.9 million recipients or 26% for OASI and 1.1 million recipients or 12% for DI; and
  • a 28% increase in the average monthly benefit payment, including increases of $324 or 32% for OASI and $202 or 23% for DI.

The average OASI recipient age increased from 71 to 72 during these periods, while the average DI recipient age increased 9% from 45 to 49 in 2018. The population aged 65 years and older, the cohort we track that is most likely to be receiving OASI benefits, increased 35%.

Medicare

Medicare payments (net of premiums received) increased $246 billion or 55%, reflecting a 14.1 million* person or 32%* increase in Medicare enrollees combined with a 21%* increase in average cost per beneficiary (net of premiums received). Medicare premiums received increased $46 billion or 84% during this period.

Our population aged 65 years and older (one eligibility requirement for Medicare) grew by 35% during this period. General medical care cost inflation was 29%, with prices of medical commodities inflating 29%, medical services inflating 35%, and hospitals inflating 63%.47

2008 to 2018 | State and local transfer payments to individuals and subsidies

The $340 billion growth in state and local transfer payments to individuals and subsidies was driven primarily by a $294 billion or 95% increase in Medicaid and CHIP payments. This increase reflects:

  • 26.2 million or 55% growth in person-year equivalent enrollment, including growth of 5.3 million children (23% growth), 4.8 million adults (44% growth), and 12.2 million enrollees newly eligible for Medicaid through the Affordable Care Act; and
  • a $1,082 or 16% increase in annual per enrollee spending, driven by a $3,809 or 23% increase in per enrollee spending for the disabled, the most expensive group served, offset in part by a $389 or 3% decrease in per enrollee spending for the aged, the second most expensive group served.46

The majority of the growth in Medicaid benefit expenditures was in the form of capitation payments.

2008 to 2018 | State and local personnel and compensation

The $272 billion increase in state and local personnel and compensation payments comprised growth of $140 billion or 22% in compensation for current employees and $132 billion or 66% in compensation for former employees.

Current employees

The 22% increase in compensation for current employees was driven by a 23%** or $8.10** per hour increase in compensation (excluding pension), including 21%** growth in wages and salaries and 36%** growth in health insurance benefits. Meanwhile, the change in the number of state and local government full-time equivalent employees was flat, reflecting a 2%** increase in full-time equivalent education employees during this period, offset by a 2%** decrease in full-time equivalent non-education employees.

Pension contributions made by current employees to their own pensions grew 33% during this period. Contributions made by state and local government employers on behalf of their employees grew 92% during this period, primarily related to defined benefit plans, which made up 93% of total employer pension contributions in 2018 and increased 100% during the period.

Former employees

The 66% increase in compensation for former employees was driven by a 42% increase in the number of retirees receiving periodic benefits and a 24% increase in the average benefit payment per recipient. The increase in number of retirees receiving benefits may be driven in part by our aging population; our population aged 65 years and older grew by 35% during this period.