4. Mandatory spending: how it is estimated and tracked¶
Short answer: mandatory spending has no annual dollar limit. Permanent laws set who is eligible and what they receive, and the Treasury pays what those rules produce. It is estimated by projecting how many people will qualify and what each will be paid, and tracked by comparing actual outlays with those projections.
How big it is¶
| Fiscal year 2025, $ billions | CBO | OMB |
|---|---|---|
| Total outlays | 7,010 | 7,011.1 |
| Mandatory outlays (net of offsetting receipts) | 4,168 (13.7% of GDP) | 4,165.9 |
| ... Social Security | 1,575 | 1,575.1 |
| ... Medicare, net of premiums and other offsetting receipts | 988 | 987.7 |
| ... Medicaid (federal share) | 668 | 668.1 |
| Net interest | 970 | 970.1 |
| Receipts | 5,235 | 5,236.4 |
| Deficit | 1,775 (5.9% of GDP) | 1,774.7 |
Table 4. Sources: CBO, Monthly Budget Review: Summary for Fiscal Year 2025 (Nov. 2025), PDF pp. 1-5; CBO, The Budget and Economic Outlook: 2026 to 2036 (Feb. 2026), PDF pp. 20, 68, 72-73; OMB Historical Tables, FY2027 Budget, Tables 1.1, 8.1 and 8.5. Gross Medicare outlays were $1,180 billion, offset by $192 billion of premiums and other receipts (CBO Outlook, PDF pp. 72-73).
On CBO's figures, mandatory programs were 59.5 percent of fiscal year 2025 outlays, and 73.3 percent with net interest, which is also paid under permanent law (data/derived.json). CBO estimates the mandatory share at about 60 percent in 2026 (Outlook, PDF p. 68).
The legal forms¶
| Form | Examples | How the money is provided |
|---|---|---|
| Trust fund programs | Social Security (OASI, DI), Medicare Part A (HI) | Paid from the trust fund's dedicated income and reserves, with no annual appropriation (Sections 6 and 7) |
| General-fund financing set by formula | Medicare Parts B and D (SMI) | Premiums plus a general-fund transfer reset each year to cover costs (Section 5) |
| Appropriated entitlements | Medicaid, SSI, SNAP, veterans' compensation | The amount is in the annual appropriations act, but the authorizing law "unconditionally obligate[s] the United States to make payments" (OMB Circular A-11, PDF p. 57); spending is controlled by benefit and eligibility rules, not by the appropriations process (CRS RS20129, PDF p. 2) |
| Permanent appropriation | Interest on the public debt | 31 U.S.C. 1305(2) appropriates the amounts necessary |
Mandatory amounts appear in the annual appropriations acts alongside discretionary ones. The Consolidated Appropriations Act, 2026 (P.L. 119-75, enacted Feb. 3, 2026) provides $508.1 billion for Grants to States for Medicaid, $593.8 billion for Payments to the Health Care Trust Funds, and $49.5 billion for SSI. For the trust-fund payments, which carry the general-revenue share of Parts B and D, it adds for payments "that were not anticipated in budget estimates, such sums as may be necessary."
How it is estimated¶
- CBO's baseline projects ten years of spending under current law; laws governing mandatory programs are assumed to continue unchanged (Outlook, PDF p. 69). Section 257 of the Balanced Budget and Emergency Deficit Control Act sets the rules: direct-spending laws operate as written and entitlements are assumed adequately funded (2 U.S.C. 907(b)); a program established by a law enacted on or before August 5, 1997 with current-year outlays above $50 million is not assumed to expire, and when a law expires any program under it above $50 million is assumed to continue (2 U.S.C. 907(b)(2)). Section 257 also requires CBO to assume that entitlement programs, including Social Security and Medicare, "will be fully funded and thus will be able to make all scheduled payments" (Outlook, PDF p. 69), so the baseline shows full benefits even after a trust fund's projected depletion, and treats Medicaid and SNAP, though paid from appropriations, as fully funded (PDF p. 68).
- The February 2026 baseline projects mandatory outlays growing 4.5 percent a year from 2027 to 2036, to $7.0 trillion; Social Security and Medicare account for 81 percent of the $2.2 trillion increase, driven mainly by an aging population and rising health care costs (PDF p. 70). Mandatory outlays reach 15.0 percent of GDP in 2036, against a 50-year average of 11.2 percent (PDF p. 70). The deficit grows from $1.9 trillion in 2026 to $3.1 trillion in 2036 (PDF p. 3).
- The Trustees Reports project the Social Security and Medicare trust funds over 75 years (Sections 5-7). OMB publishes its own baseline with the President's budget.
How new laws are kept in check¶
- Statutory PAYGO. The Statutory Pay-As-You-Go Act of 2010 "reestablished a statutory rule of budget neutrality" for new revenue and direct-spending laws (2 U.S.C. 931). OMB keeps two scorecards, five-year and ten-year (2 U.S.C. 933). A debit on either at the end of a session triggers a sequester of non-exempt mandatory spending (2 U.S.C. 934); Medicare cuts are limited to 4 percent (2 U.S.C. 935(a), 906(d)). Social Security, Medicaid, SNAP, SSI and Payments to the Health Care Trust Funds are exempt (2 U.S.C. 905), and off-budget Social Security effects are not counted (OMB 2025 annual PAYGO report, PDF p. 2).
- In practice it has not bitten. A statutory PAYGO sequester has never been triggered; costly laws have often included provisions exempting them (CRS R45106, PDF p. 7). Laws enacted in the 2025 session created balances of $529 billion a year on the five-year scorecard and $444 billion a year on the ten-year one; P.L. 119-37 (Nov. 2025) then set both scorecards to zero, as the American Relief Act, 2025 (P.L. 118-158) had done for the previous session, so no sequester was ordered for fiscal year 2026 (OMB 2025 PAYGO report, PDF pp. 1-3).
- The Budget Control Act's Medicare cut. Under 2 U.S.C. 901a, a sequester of mandatory spending is ordered each year for fiscal years 2022 through 2031, with Medicare cuts capped at 2 percent; a Medicare-only order for fiscal year 2032 applies 2 percent for its first eight months and nothing for the last four (as amended by P.L. 118-42). The first order took effect April 1, 2013 (CRS R45106, PDF p. 13). It was suspended for Medicare from May 1, 2020 through March 31, 2022 and was 1 percent from April 1 to June 30, 2022 (2 U.S.C. 901a). CBO counts the reductions through 2033 and estimates the sequestration provisions save $221 billion over 2027-2036 (Outlook, PDF pp. 76-77).
The taxes that fund the trust funds¶
| Tax | Rate | Wage limit | Goes to | Source |
|---|---|---|---|---|
| Social Security (OASDI) | 6.2% employee + 6.2% employer | $184,500 in 2026 | OASI and DI trust funds | 26 U.S.C. 3101(a), 3111(a); IRS Topic 751 |
| Medicare (HI) | 1.45% employee + 1.45% employer | none since 1994 | HI trust fund | 26 U.S.C. 3101(b)(1), 3111(b); Medicare TR 2026, PDF p. 30 |
| Additional Medicare Tax | 0.9%, employee only (no employer match) | applies above $200,000 (single), $250,000 (joint), $125,000 (married filing separately) | HI trust fund since 2013 | 26 U.S.C. 3101(b)(2); IRS Q&A; Medicare TR 2026, PDF p. 30 |
| Net Investment Income Tax | 3.8% of investment income for individuals above $200,000 and couples above $250,000 | n/a | General fund: "not allocated to the Medicare trust funds" | 26 U.S.C. 1411; Medicare TR 2026, PDF p. 30 |
How actual spending is tracked¶
- Outlays against projections. CBO's Monthly Budget Review compares outlays by major program with the same period a year earlier; for the first 11 months of fiscal year 2026 it estimated a $2.0 trillion deficit and growth of $198 billion (7 percent) in the three largest mandatory programs (MBR, Aug. 2026, PDF pp. 1, 3). CBO also reviews its own accuracy: the fiscal year 2025 deficit, excluding customs duties, was $95 billion smaller than projected, 0.3 percent of GDP, but Medicaid and CHIP outlays were underestimated by $70 billion (10 percent) (CBO, Jan. 2026, PDF pp. 1, 8).
- OMB Historical Tables. Table 8.5 ("Outlays for Mandatory and Related Programs") and Table 11.3 ("Outlays for Payments for Individuals by Category and Major Program") give program-level outlays every year; in fiscal year 2025 Table 11.3 shows $1,417.1 billion for OASI, $157.4 billion for DI, $432.9 billion for Medicare HI and $732.5 billion for SMI.
- Program data. SSA's Monthly Statistical Snapshot (75.88 million people receiving Social Security, SSI or both in August 2026), state CMS-64 Medicaid expenditure reports, and USDA's SNAP data tables.
- Payments that should not have been made. Agencies reported about $186 billion of improper payments for fiscal year 2025, up about $24 billion from $162 billion; about 82 percent were overpayments (Financial Report FY2025, PDF pp. 240-241). Medicare (three programs) accounted for $56.7 billion and Medicaid $37.4 billion (PDF p. 240). The Medicare fee-for-service improper payment rate was 6.55 percent ($28.83 billion) and the Medicaid rate 6.12 percent ($37.39 billion), up from 5.09 percent (CMS fact sheet).
- Long-term promises. The Statement of Social Insurance in the Financial Report shows the 75-year present value of Social Security, Medicare and other social insurance spending exceeding revenue by about $88.4 trillion; about $60.4 trillion (68 percent) relates to Medicare and $27.9 trillion to Social Security (Financial Report FY2025, PDF pp. 40, 48, 74). These amounts "are not considered liabilities" in the government's accounts (PDF p. 40). The trust funds' reserves appear instead as intragovernmental debt: $2.6 trillion held by Social Security and $406.7 billion by the Medicare trust funds (PDF p. 32).