This paper examines the effects of inflation on the expenditures made by federal health programs, in total and by functional category. Over the period 1969-74, a total increase of more than 90 per cent in federal dollars was required to support real growth of 44 per cent. Federally financed service programs, like Medicare and Medicaid, and health manpower training programs made particularly large gains, while construction support for health care facilities lost substantially in real terms. Health research and prevention and control programs made more moderate real gains—25 and 29 per cent, respectively, over the period. Comparison of inflation rates in the health sector and in the economy generally suggest that there are important inflationary forces specific to that sector; policies to stem general inflation cannot be expected to solve the problem of health sector inflation.