Among its many provisions, ACA restructures the private health insurance market, sets minimum standards for health coverage, and, beginning in 2014, will require most U.S. residents to obtain health insurance coverage or pay a penalty. Qualifying individuals and families will be able to receive federal subsidies to reduce the cost of purchasing coverage through the exchanges. The law includes direct spending to subsidize the purchase of health insurance coverage through the exchanges, as well as increased outlays for the expansion of state Medicaid programs. ACA also includes numerous mandatory appropriations to fund temporary programs to increase access and funding for targeted groups, provide funding to states to plan and establish exchanges, and support many other research and demonstration programs and activities. The report is periodically revised and updated to reflect important legislative and other developments. Patient Protection and Affordable Care Act

The primary goal of ACA is to increase access to affordable health insurance for the millions of Americans without coverage and make health insurance more affordable for those already covered. Automatic Annual Spending Reductions Under the Budget Control Act

As noted in the introduction to this report, the FY2013 sequestration is the first in a series of automatic annual spending reductions triggered under the BCA by the failure of the Joint Select Committee on Deficit Reduction to propose, and Congress and the President to enact, deficit-reduction legislation. In addition, the BCA established a process for reducing the federal deficit by at least $2.1 trillion over the 10-year period FY2012-FY2021. First, the law placed enforceable limits, or caps, on discretionary spending for each of those 10 fiscal years. The Joint Committee was instructed to develop legislation to reduce the federal deficit by at least $1.5 trillion through FY2021. If the budget deficit exceeded those target levels, then automatic across-the-board spending cuts would be triggered. For each of the remaining fiscal years (i.e., FY2014-FY2021), however, discretionary spending reductions will be achieved by lowering the BCA-imposed discretionary spending cap by the total dollar amount of the reduction. Impact on Health Reform Spending

The final section of this report discusses the potential impact of the BCA-triggered automatic spending reductions, both in FY2013 and in future years, on the following types of ACA-related spending: (1) mandatory spending on insurance coverage expansion, including exchange subsidies and Medicaid; (2) other mandatory spending; (3) discretionary spending; and (4) federal administrative expenses. For any given fiscal year in which sequestration is ordered, only new budget authority for that year (including advance appropriations that first become available for obligation in that year) is reduced. Unobligated balances (non-defense only) carried over from previous fiscal years are exempt from a sequestration order. The law reauthorized appropriations for numerous existing discretionary grant programs and activities authorized under the PHSA, and permanently reauthorized appropriations for programs and services provided by the Indian Health Service (IHS). ACA also created a number of new discretionary grant programs and provided for each an authorization of appropriations. CBO has projected that both the Centers for Medicare and Medicaid Services (CMS) within HHS and the Internal Revenue Service (IRS) will incur substantial administrative costs to implement ACA.
The Budget Control Act of 2011 (BCA) established new budget enforcement mechanisms for reducing the federal deficit over the 10-year period FY2012-FY2021. The BCA placed statutory limits, or caps, on discretionary spending for each of those 10 fiscal years, which will save an estimated $0.9 trillion during that period. In addition, it created a Joint Select Committee on Deficit Reduction (Joint Committee) with instructions to develop legislation to reduce the federal deficit by at least another $1.5 trillion through FY2021. In the event that Congress and the President were unable to enact a Joint Committee bill—as turned out to be the case—then automatic annual spending reductions would be triggered beginning in FY2013 and extending through FY2021. Under the BCA, the reductions will be achieved by a combination of sequestration (i.e., an automatic across-the-board cancellation of budgetary resources) and, beginning in FY2014, by lowering the discretionary spending caps. The President ordered the FY2013 sequestration on March 1, 2013.
The potential impact of spending reductions triggered by the BCA on health reform spending under the Patient Protection and Affordable Care Act (ACA) appears to be somewhat limited. ACA sought to increase access to affordable health insurance by expanding the Medicaid program and by restructuring the private health insurance market. It set minimum standards for private insurance coverage, created a mandate for most U.S. residents to obtain coverage, and provided for the establishment by 2014 of state-based insurance exchanges for the purchase of health insurance. Certain individuals and families will be able to receive federal subsidies to reduce the cost of purchasing coverage through the exchanges. The new law included direct spending to subsidize the purchase of health insurance coverage through the exchanges, as well as increased outlays for the Medicaid expansion. Under the rules governing sequestration, all Medicaid spending and most of the spending on subsidies is exempt from any reduction, and cuts to Medicare are capped at 2%.
ACA also included numerous mandatory appropriations that provide billions of dollars to support temporary programs to increase coverage and funding for targeted groups, provide funds to states to plan and establish exchanges, and support many other research and demonstration programs and activities. Generally, these appropriations are fully sequestrable. However, for any given fiscal year in which sequestration is ordered, only new budget authority for that year is reduced. Unobligated balances carried over from previous fiscal years are exempt from sequestration.
ACA also is having an effect on discretionary spending, which is subject to the annual appropriations process. The law reauthorized appropriations for numerous existing discretionary grant programs authorized under the Public Health Service Act, permanently reauthorized funding for the Indian Health Service (IHS), and created a number of new grant programs and provided for each an authorization of appropriations. In addition, the Congressional Budget Office projected that both the Department of Health and Human Services and the Internal Revenue Service will incur substantial administrative costs to implement ACA's policies and programs. ACA-related discretionary spending generally is fully sequestrable.
The report is periodically revised and updated to reflect important legislative and other developments.