Appropriations and Fund Transfers in the Affordable Care Act (ACA)
Released: 2017-02-07T00:00:00

Introduction

Implementation of the Patient Protection and Affordable Care Act (Affordable Care Act, or ACA) is having a significan t impact on federal mandatory—also known as direct—spending. Most of the projected spending under the law is for expanding health insurance coverage. This includes premium tax credits and cost-sharing reduction payments for individuals and families who purchase private insurance coverage through the health insurance exchanges established under the ACA, as well as federal matching funds for states that choose to expand their Medicaid programs.

The Internal Revenue Service (IRS) reports that spending on the premium tax credits and cost-sharing reductions totaled $79.2 billion for first three fiscal years (i.e., FY2014-FY2016) in which the ACA exchanges were operational.

An analysis of preliminary data from the Medicaid Budget and Expenditure System (MBES) released by the Centers for Medicare and Medicaid Services (CMS) provides some insight into the initial impact of the Medicaid expansion on spending. For calendar year 2014, the 27 states that implemented the expansion reported spending a total of $36.7 billion on newly eligible adults, which under the ACA was paid for entirely with federal funds (i.e., 100% federal match). The same states spent an additional $10.5 billion on adults that were previously eligible at traditional federal match rates or subject to technical adjustments. Expenditures for these individuals were subject to a higher rate than the traditional match rate, but not 100%.

In its March 2016 baseline budget projections, the Congressional Budget Office (CBO) estimates that gross spending on insurance coverage expansion under the ACA will total $1.938 trillion over the 10-year period FY2017 through FY2026. That total includes $866 billion on exchanges subsidies—premium tax credits and cost-sharing reductions—and related spending, and $1.063 trillion on Medicaid and the State Children's Health Insurance Program (CHIP). CBO projects that these costs will be offset by revenues from the ACA's taxes and fees, and by savings from the law's changes to the Medicare program that are designed to slow the rate of growth of Medicare payments to certain health care providers.

The ACA also included numerous appropriations that are providing billions of dollars in mandatory funds to support new and existing grant programs and other activities. Several other provisions in the law require the Secretary of Health and Human Services (HHS) to transfer amounts from the Medicare Part A and Part B trust funds for specified purposes.

This report summarizes all the mandatory appropriations and Medicare trust fund transfers in the ACA and provides details, where publicly available, on the status of obligation of these funds. The information is presented in two tables. The report also includes a brief discussion of the impact that sequestration is having on ACA mandatory spending. This report is periodically revised and updated to reflect important legislative and other developments.

A companion CRS report discusses the ACA's impact on discretionary spending, which is controlled by the annual appropriations process. Discretionary spending under the ACA falls into two broad categories. First, there are the amounts provided in appropriations acts for specific grant and other programs pursuant to explicit authorizations of appropriations in the ACA. Second, there are the costs incurred by the federal agencies that are responsible for administering and enforcing the ACA's core provisions to expand insurance coverage.

ACA Appropriations and Fund Transfers

Table 2 summarizes all the ACA provisions that include an appropriation of funds or a transfer of amounts from the Medicare trust funds. The provisions are grouped under the following headings: (1) Private Health Insurance; (2) Medicaid and the State Children's Health Insurance Program (CHIP); (3) Medicare; (4) Fraud and Abuse; (5) Health Centers; (6) Health Workforce and the National Health Service Corps; (7) Community-Based Prevention and Wellness; (8) Maternal and Child Health; (9) Long-Term Care; (10) Comparative Effectiveness Research; (11) Biomedical Research; and (12) ACA Implementation: Administrative Expenses.

Each table row provides information on a specific ACA provision, organized across four columns. The first column shows the ACA section or subsection number. The second column indicates whether the provision is freestanding (i.e., statutory authority that is not amending an existing statute) or amendatory (i.e., amends an existing statute, typically the Social Security Act). Amendatory provisions either add a new program to the statute or modify an existing one. The third column gives a brief description of the program or activity, including details of the appropriation or fund transfer. The entry also includes the name of the administering agency within HHS and, if applicable, the Catalog of Federal Domestic Assistance (CFDA) number for the grant program. The fourth column shows how much funding has been obligated to date. An agency incurs an obligation, for example, by placing an order, signing a contract, awarding a grant, purchasing a service, or taking other actions that require the government to make payments.

The obligation amounts are based on information in the HHS Tracking Accountability in Government Grants System (TAGGS) unless specified otherwise. The TAGGS database is a central repository for grants awarded by all the HHS operating divisions (agencies) and several offices within the Office of the Secretary. It is updated daily with new data provided by these entities.

Appropriations Vary by Duration and Amount

In many instances the ACA provided annual appropriations of specified amounts for one or more fiscal years. Generally, these funds must be obligated during the fiscal year in which the funds become available for obligation. A few provisions are multiple-year appropriations , in which the amount appropriated is available for obligation for a period of time in excess of one fiscal year (e.g., for the period FY2011 through FY2014). Often the provision includes additional language stating that the funds are to remain available "until expended" or "without fiscal year limitation."

Most ACA appropriations and fund transfers are temporary (i.e., time-limited). Often they end in FY2014 or FY2015, though in a handful of instances they extend until FY2019. The law included four provisions (i.e., Sections 3021(a), 3403, 10323(b), and 4002) that continue to provide annual or multiple-year appropriations in perpetuity.

The ACA also included three indefinite appropriations that provide an unspecified amount of funding as indicated by the phrase "such sums as may be necessary," or SSAN. One such provision (i.e., Section 1311) appropriated SSAN and authorized the HHS Secretary to determine the specific amount necessary for the grant program.

Table 3 provides additional details on each of the appropriations (and fund transfers) summarized in Table 2 . It shows the amount available for obligation in each fiscal year (or multi-year period) over the 10-year period FY2010 through FY2019. Note that the provisions are organized and grouped under the same headings used in Table 2 . The final column in Table 3 ("Total") shows for each provision the total amount of appropriations or fund transfers. Note that in several cases the total amount has yet to be determined (see table entries for Sections 1311, 3403, 6301(d) & (e), 9023(e), and 10323(a)). For three of the provisions that continue to provide funding beyond FY2019, the amount in the total column represents the cumulative amount appropriated through FY2019 (see table entries for Sections 3021(a), 4002, and 10323(b)). Unless otherwise stated, references to the Secretary in both tables refer to the HHS Secretary. A list of the federal laws, agencies, programs, and funds referred to in this report by their acronym is provided in Appendix A .

Numerous Programs Are Funded

As summarized in the tables, the ACA funded a broad range of new and existing programs. The law appropriated significant amounts to support the following short-term health care programs for targeted groups prior to the health insurance exchanges becoming operational in 2014: (1) $5 billion for the Pre-Existing Condition Insurance Plan (PCIP), a temporary insurance program that provided health insurance coverage for uninsured individuals with a pre-existing condition; (2) $5 billion for a temporary reinsurance program to reimburse employers for a portion of the costs of providing health benefits to early retirees aged 55-64; and (3) $6 billion for the Consumer Operated and Oriented Plan (CO-OP) program, to support temporary health insurance cooperatives. The ACA appropriated $2.4 billion for maternal and child health programs and provided an unspecified amount of funding for state grants to plan and establish health insurance exchanges.

The law established the Center for Medicare and Medicaid Innovation (CMMI) within CMS and appropriated $10 billion for the FY2011-FY2019 period—and $10 billion for each subsequent 10-year period—for CMMI to test and implement innovative payment and service delivery models. It also established and funded an Independent Payment Advisory Board (IPAB) to make recommendations to Congress for achieving specific Medicare spending reductions if costs exceed a target growth rate. IPAB's recommendations are to take effect unless Congress overrides them, in which case Congress would be responsible for achieving the same level of savings.

The ACA created four special funds and appropriated substantial amounts to each one:

The Community Health Center Fund (CHCF) , to which the ACA appropriated a total of $11 billion in annual appropriations over the five-year period FY2011-FY2015, has helped support the federal health centers program and the National Health Service Corps (NHSC). (Note: A separate ACA appropriation provided $1.5 billion for health center construction and renovation.) Congress has since appropriated two additional years of funding for the CHCF (see below). While CHCF funding may have been intended to supplement annual discretionary appropriations for the health centers program and the NHSC, the funds have partially supplanted (i.e., replaced) discretionary health center funding and have become the sole source of funding for the NHSC program, which has not received an annual discretionary appropriation since FY2011. The Prevention and Public Health Fund (PPHF) , for which the ACA provided a permanent annual appropriation, is intended to support prevention, wellness, and other public health-related programs and activities authorized under the Public Health Service Act (PHSA). In two separate legislative actions, Congress has reduced the ACA's annual appropriation to the PPHF for each of FY2013 through FY2024 by a total of $9.75 billion. PPHF funds have been used to support several new discretionary grant programs authorized by the ACA. The funds are also supplementing, and in some cases supplanting, annual discretionary appropriations for a number of established programs, including ones that were reauthorized by the ACA. In FY2013, almost half of the PPHF funds were used to help pay for CMS's administrative costs associated with exchange operations. The Patient-Centered Outcomes Research Trust Fund (PCORTF) is supporting comparative effectiveness research with a mix of annual appropriations—some of which are offset by revenues from a fee imposed on private health plans—and transfers from the Medicare Part A and Part B trust funds through FY2019. The Health Insurance Reform Implementation Fund (HIRIF) , to which the ACA appropriated $1 billion, has helped cover the administrative costs of implementing the law.

Some Funding Has Been Extended or Rescinded

As already noted, most of the ACA appropriations are temporary. The following laws enacted since 2012 have extended funding for several programs funded by the ACA:

American Taxpayer Relief Act of 2012 (ATRA); Pathway for SGR Reform Act of 2013 (PSGRRA); Protecting Access to Medicare Act of 2014 (PAMA); and Medicare Access and CHIP Reauthorization Act of 2015.

Lawmakers opposed to specific ACA provisions also have succeeded in getting some ACA funding reduced or rescinded. ATRA, the Middle Class Tax Relief and Job Creation Act of 2012, the 21 st Century Cures Act, and enacted appropriations acts for each of the past six fiscal years (i.e., FY2011-FY2016) all included ACA funding reductions or rescissions.

The ACA funding extensions, reductions, and rescissions are summarized in Table 2 and Table 3 .

Impact of Sequestration

While the federal spending on insurance expansion coverage under the ACA is almost entirely exempt from annual sequestration, the ACA appropriations discussed in this report are, in general, fully sequestrable at the percentage rate applicable to nonexempt nondefense mandatory spending (see Table 1 ). Under the sequestration general rules, cuts in CHCF funding for community health centers and migrant health centers are capped at 2%. See Appendix B for more background on the annual spending reductions triggered by the Budget Control Act of 2011.

Importantly, only new budget authority for nondefense programs is sequestrable in any given fiscal year. That includes advance appropriations that first become available for obligation in that year. Unobligated balances carried over from previous fiscal years are exempt from sequestration.

Key Takeaways

Overall, the ACA provided more than $100 billion in mandatory appropriations and Medicare fund transfers over the 10-year period FY2010-FY2019. As enacted, the law included the following amounts:

$40 billion for CHIP (FY2014 and FY2015); $15 billion for the PPHF through FY2019 (and $2 billion for each year thereafter); $11 billion for the CHCF; $10 billion for CMMI through FY2019 (and $10 billion for each 10-year period thereafter); $6 billion for the CO-OP program; $5 billion for PCIP; $5 billion for the Early Retiree Reinsurance program $4 billion (projected) for the PCORTF; $2.25 billion for the Medicaid Money Follows the Person (MFP) demonstration; and $1.5 billion for the maternal, infant, and early childhood visitation program.

Only four of the ACA appropriations are permanent (i.e., CMMI, IPAB, PPHF, and environmental health screening). All the other appropriations were temporary.

In a series of legislative actions (described in more detail in Table 2 and Table 3 ), Congress extended funding for several programs whose ACA appropriations were about to expire. The following programs are now funded through FY2017:

health centers (CHCF funding); National Health Service Corps (CHCF funding); graduate medical education (GME) payments for teaching health centers; maternal, infant, and early childhood home visiting program; personal responsibility education program (PREP); health workforce demonstration programs; abstinence education grants; family-to-family health information centers; and outreach and assistance for low-income programs.

Congress has also provided two more years of funding (FY2016-FY2017) for CHIP.

Finally, Congress has partially reduced or rescinded ACA funding for IPAB, PPHF, and the CO-OP program.

Appendix A. Acronyms Used in the Report

The following laws, agencies, programs, and funds are referred to in this report by their acronym.

Appendix B. Annual Spending Reductions Under the Budget Control Act

The Budget Control Act of 2011 (BCA) amended the Balanced Budget and Emergency Deficit Control Act of 1985 (BBEDCA) by establishing two budget enforcement mechanisms to reduce federal spending by at least $2.1 trillion over the 10-year period FY2012 through FY2021. First, the BCA established enforceable discretionary spending limits, or caps, for defense and nondefense spending for each of those years. Second, the BCA created a Joint Committee on Deficit Reduction to develop legislation to further limit federal spending. The failure of the Joint Committee to agree on deficit-reduction legislation triggered automatic annual spending reductions for each of FY2013 through FY2021.

The BCA specified that a total of $109 billion must be cut each year from nonexempt budget accounts. That amount is equally divided between the categories of defense and nondefense spending. Within each category, the spending cuts are allocated proportionately to discretionary spending and nonexempt mandatory (i.e., direct) spending. Under the BCA, the spending reductions are achieved through two methods: (1) sequestration (i.e., an across-the-board cancellation of budgetary resources); and (2) lowering the BCA-imposed discretionary spending caps.

The BCA requires that the mandatory spending reductions in each category—defense and nondefense—must be executed in each of FY2013 through FY2021 by a sequestration of all nonexempt accounts, subject to the BBEDCA sequestration rules. Discretionary spending in each category is also subject to sequestration, but only in FY2013. For each of the remaining fiscal years (i.e., FY2014 through FY2021), discretionary spending reductions are to be achieved by lowering the discretionary spending caps for defense and nondefense spending by the total dollar amount of the required reduction. Thus, congressional appropriators get to decide how to apportion the cuts within the lowered spending caps rather than having the cuts applied across-the-board to all nonexempt discretionary spending accounts through sequestration.

The Office of Management and Budget (OMB) is responsible for calculating the percentages and amounts by which mandatory and discretionary spending are required to be reduced each year, and for applying the BBEDCA's sequestration exemptions and rules.

Congress has amended the BCA several times since its enactment in 2011. The American Taxpayer Relief Act of 2012 (ATRA) revised the discretionary spending caps for FY2013 and FY2014 and reduced the overall dollar amount that needed to be sequestered from FY2013 mandatory defense and nondefense spending.

The Bipartisan Budget Act of 2013 established new discretionary spending caps for FY2014 and FY2015 and eliminated the requirement for these caps to be lowered. It also extended the sequestration of mandatory spending in the defense and nondefense categories for two additional years—FY2022 and FY2023—and specified that the percentage reduction calculated for FY2021 be applied to both those years.

A provision in a 2014 law on military retirement pay extended the sequestration of mandatory spending to include FY2024 and, again, specified that the percentage reduction calculated for FY2021 be applied to that additional year.

The Bipartisan Budget Act of 2015 established new discretionary spending caps for FY2016 and FY2017 and eliminated the requirement for these caps to be lowered. It further extended the sequestration of mandatory spending to include FY2025, once again using the percentage reduction calculated for FY2021.