Discretionary Spending Under the Affordable Care Act (ACA)
Released: 2017-02-08T00:00:00

Introduction

Implementation of the Affordable Care Act (ACA) is having a substantial impact on federal mandatory spending. Most of the mandatory spending under the law is for expanding health insurance coverage. This includes premium tax credits and cost-sharing subsidies for individuals and families who purchase private insurance coverage through the ACA health insurance exchanges, as well as federal matching funds for states that choose to expand their Medicaid programs.

In addition, the ACA authorized new Medicare spending and appropriated billions of dollars in mandatory funds to support numerous other activities and programs. For example, it provided a permanent appropriation—available for 10-year periods—for a Center for Medicare & Medicaid Innovation to test and implement innovative health care payment and service delivery models. Furthermore, the ACA established four special funds—and appropriated amounts to each one—to support primary care, public health, and comparative effectiveness research, and help pay for the administrative costs of the law's implementation.

The ACA is having a more modest impact on federal discretionary spending, which is subject to 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 federal agencies to administer and enforce the health insurance reforms and other core requirements of the law. The two agencies primarily responsible for the ACA's implementation are the Centers for Medicare & Medicaid Services (CMS), within the Department of Health and Human Services (HHS), and the Internal Revenue Service (IRS), within the Department of the Treasury. Both agencies have requested additional administrative funding in recent years to help cover the costs of implementing the law.

This report examines the ACA's effects on discretionary spending. First, it discusses all the ACA authorizations (and reauthorizations) of appropriations for grant and other programs. This information, along with the appropriation amounts (if any) for each program since FY2010, is summarized in a series of tables. The report then briefly discusses the ACA administrative costs borne by CMS and the IRS. Appendix A provides background information on the enforceable discretionary spending limits (caps) and the annual spending reductions under the Budget Control Act of 2011.

This report is periodically revised and updated to reflect important legislative and administrative developments. The next update will occur after Congress completes its work on the FY2017 appropriations acts and the President releases the FY2018 budget. A companion CRS report summarizes all the ACA's mandatory appropriations and the obligation of these funds.

ACA Authorizations of Appropriations

The ACA authorized numerous new discretionary grant programs and provided for each an authorization of appropriations, typically through FY2014 or FY2015. Many of these provisions authorize annual appropriations of specified amounts for one or more fiscal years to carry out the program. Other provisions authorize the appropriation of specified amounts for FY2010 or FY2011, and unspecified amounts—such sums as may be necessary, or SSAN—for later years. A few provisions authorize multi-year appropriations, available for obligation for a period in excess of one fiscal year (e.g., for the period FY2011 through FY2014). Numerous other provisions simply authorize the appropriation of SSAN, in a few cases without specifying any fiscal years.

The ACA also was a convenient legislative vehicle to reauthorize funding—in most instances through FY2014 or FY2015—for many existing discretionary grant programs, primarily ones authorized under the Public Health Service Act (PHSA). They include most, but not all, of the health workforce education and training programs administered by the Health Resources and Services Administration (HRSA). The authorizations of appropriations for many of these established programs had expired prior to the ACA, though most of them were continuing to receive annual funding. Importantly, the ACA permanently reauthorized appropriations for the federal health centers program, the National Health Service Corp (NHSC), and many programs and services provided by the Indian Health Service (IHS).

All the ACA's discretionary spending provisions that include authorizations of appropriations are summarized in a series of tables below. The provisions are organized by general topic under the following headings: Health Centers and Clinics ( Table 2 ); Health Care Workforce ( Table 3 ); Prevention and Wellness ( Table 4 ); Maternal and Child Health ( Table 5 ); Health Care Quality ( Table 6 ); Nursing Homes ( Table 7 ); Health Disparities Data Collection ( Table 8 ); Emergency Care ( Table 9 ); Elder Justice ( Table 10 ); Biomedical Research ( Table 11 ); Biologics ( Table 12 ); 340B Drug Pricing ( Table 13 ); Medical Malpractice ( Table 14 ); Pain Care Management ( Table 15 ); Medicaid ( Table 16 ); Medicare ( Table 17 ); and Private Health Insurance ( Table 18 ).

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., new statutory authority that is not amending an existing statute) or amendatory (i.e., amends an existing statute such as the PHSA). Amendatory provisions either add a new program to the statute or modify an existing one. The name of the administering agency or office within HHS is also included, if known. The third column provides a brief description of the program, including the types of entities and/or individuals eligible for funding, and gives details of the authorization of appropriations.

Finally, the fourth column shows the program's actual funding levels for FY2010 through FY2016 if it received any discretionary appropriations (or other funding) during that period. Many of the programs have seen their discretionary funding remain flat or decrease since FY2010. Funding from sources other than annual discretionary appropriations (e.g., ACA mandatory funds) is shown in parentheses. Unless otherwise noted, the funding figures represent final amounts reflecting sequestration and other adjustments. The FY2017 funding request, if applicable, is also provided.

All the discretionary funding listed in the tables in this report is provided by the Departments of Labor, Health and Human Services, and Education, and Related Agencies (L-HHS-ED) annual appropriations act. If CRS was unable to identify specific appropriations for a program, then that is indicated by the phrase "No appropriations identified." In some instances a program may be supported with funds from another budget account.

In each of the larger tables with multiple entries (i.e., Tables 2, 3, 4, 6 and 9 ), the ACA provisions are grouped based on whether they reauthorize funding for existing programs or authorize funding for new programs. Where available, the table entry includes the Catalog of Federal Domestic Assistance (CFDA) number for the grant program. Unless otherwise stated, all references in the tables to the Secretary refer to the HHS Secretary.

Annual Appropriation Amounts to Date

The Congressional Budget Office (CBO) estimated that fully funding the discretionary grant programs authorized (or reauthorized) by the ACA, based on the amounts specified in the authorizations of appropriations, would result in appropriations of almost $100 billion over the period FY2012-FY2021. Three programs—the health centers program, the NHSC, and the IHS—account for about $85 billion of that total amount. These programs were in existence prior to the ACA and were permanently reauthorized by the law.

An examination of the tables in this report, however, shows that the total amount of discretionary funding provided to date falls well below CBO's estimate. There are two reasons for this discrepancy. The first reason is that few of the new grant programs authorized by the ACA have received any discretionary appropriations, though a handful have received mandatory funds from the ACA's Prevention and Public Health Fund (PPHF). In most instances, the Administration has not requested discretionary funding for these programs, nor have the appropriators provided any funds. Under the current statutory limits (caps) on discretionary spending (see Appendix A ), appropriators may find it difficult to fund new programs if they wish to maintain funding levels for long-standing programs with an established appropriations history.

The second reason is that programs that were reauthorized by the ACA generally have received discretionary appropriations at levels well below the amounts authorized in the law. The federal health center program (see Table 2 ) and the NHSC (see Table 3 ) are particularly noteworthy in this regard. These programs have seen a significant reduction in their discretionary appropriations since FY2010, despite the fact that the ACA authorized the appropriation of steadily increasing amounts during this period. Both programs also are receiving substantial mandatory funding from the ACA's Community Health Center Fund (CHCF). CHCF funds have become the sole source of funding for the NHSC, which has not received an annual discretionary appropriation since FY2011. In addition, PPHF funds have supplemented, and in some cases replaced, annual discretionary appropriations for a number of established programs, including ones that were reauthorized by the ACA.

Expired Authorizations of Appropriations

It was noted earlier that the ACA generally authorized (or reauthorized) discretionary appropriations through FY2014 or FY2015. As a result, most of the programs discussed in this report now have expired authorizations of appropriations; four programs have been reauthorized. One ACA program, which never received any funding, has been repealed. A list of all the currently expired programs is provided in Table B-1 in Appendix B .

ACA Administrative Spending

CMS and the IRS are incurring significant administrative costs to implement the ACA. Both agencies have requested an increase in their annual appropriations in each of the past five years (i.e., FY2013-FY2017) to help cover those costs. But Congress has repeatedly denied their requests for additional discretionary funding for ACA implementation.

CMS has instead relied on funding from a variety of sources to support the development and operation of the federally facilitated exchange (FFE). Table 1 shows total funding for FFE operations since FY2010.

Prior to FY2013, CMS used discretionary funding from its Program Management account—supplemented by a small amount of discretionary funding from the HHS Departmental Management account—for FFE development. The agency also used mandatory funds from the Health Insurance Reform Implementation Fund (HIRIF), which is administered by the HHS Secretary. The ACA established the HIRIF and appropriated $1 billion to it to help pay for administration of the law.

In the FY2013 budget, CMS requested an increase of $1.001 billion for its Program Management account for FFE operations and other activities. Congress did not provide CMS with any additional discretionary funding that year, so the HHS Secretary tapped funds from other sources. They included (1) discretionary funds transferred from other HHS accounts under the Secretary's transfer authority; (2) expired discretionary funds from the Nonrecurring Expenses Fund (NEF); (3) mandatory funds from the HIRIF; and (4) mandatory funds from the PPHF.

In the FY2014 budget, CMS requested an increase of $1.397 billion for its Program Management account for FFE operations and other activities. Once again, Congress did not give CMS any additional funding. The agency relied on transferred departmental funds as well as NEF and HIRIF funding to help support the FFE. However, Congress prevented—and continues to prevent—the use of PPHF funds by CMS. FY2014 was the first year in which CMS collected FFE user fees; a total of $252 million (see Table 1 ). Under the ACA, exchanges are permitted to charge participating insurance companies an assessment or user fee to support their operations.

In the FY2015 budget, CMS requested an increase of $227 million for its Program Management account to fund FFE operations and other activities. As in the previous two years, Congress denied the agency's request for additional funding. CMS collected $888 million in FFE user fees in FY2015 (see Table 1 ) to help support FFE operations. But with most of the HIRIF funds already obligated, and PPHF funds off limits, CMS appears to have relied largely on discretionary sources for the rest of the funding it needed for FFE operations.

In the FY2016 budget, CMS requested an increase of $270 million for its Program Management account for FFE operations and other activities, none of which was provided by Congress. The agency collected an estimated $1.225 billion in FFE user fees, accounting for 61% of the agency's total funding for FFE operations (see Table 1 ).

CMS requested an increase of $135 million for its Program Management account in FY2017 for FFE operations and other activities. The agency anticipates collecting approximately $1.604 billion in FFE user fees in FY2017, which will cover about cover about three-quarters of the estimated funding for FFE operations (see Table 1 ).

There are fewer details about the IRS's funding for ACA implementation. The IRS is responsible for administering the law's tax provisions, including the premium tax credit and other subsidies. However, the agency has not provided—or been instructed by Congress to provide—a breakdown of its spending on ACA implementation. Like CMS, the IRS requested additional funding for ACA implementation in each of the past five years: $360 million for FY2013, $440 million for FY2014, $436 million for FY2015, $474 million for FY2016, and $195 million for FY2017. But, as with CMS, Congress has not given the IRS any additional funding. According to the HHS budget office, the department transferred to the IRS a total of $543 million in HIRIF funds over the FY2010-FY2016 period to help support ACA implementation.

Appendix A. Discretionary Spending and the Budget Control Act of 2011

Congress has taken a number of steps in recent years to limit federal discretionary spending. In April 2011, lawmakers agreed to cuts in discretionary spending for a broad range of agencies and programs as part of negotiations to complete the FY2011 appropriations process and avert a government shutdown. Four months later, as part of negotiations to raise the debt ceiling, Congress and the President enacted the Budget Control Act of 2011 (BCA).

The BCA established enforceable discretionary spending limits, or caps, for defense and nondefense spending for each of FY2012 through FY2021, and provided for further annual spending reductions equally divided between the categories of defense and nondefense spending beginning in FY2013. Within each spending category, those further reductions are allocated proportionately to discretionary spending and mandatory spending, subject to certain exemptions and special rules. All the spending summarized in this report falls within the nondefense category.

Under the BCA, spending reductions are achieved through two different methods: (1) sequestration (i.e., an across-the-board cancellation of budgetary resources) and (2) lowering the BCA-imposed discretionary spending caps. 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 relevant exemptions and special rules.

The BCA requires mandatory spending reductions to be executed each year through a sequestration of all nonexempt accounts. Discretionary spending also was reduced through sequestration in FY2013. However, for each of the remaining fiscal years (i.e., FY2014 through FY2021), the annual reductions in discretionary spending required under the BCA are to be achieved by lowering the discretionary spending caps by the total dollar amount of the required reduction. This means that the cuts within the lowered spending cap may be apportioned through the annual appropriations decisionmaking, rather than via an across-the-board reduction through sequestration.

FY2013 Sequestration

Nonexempt nondefense discretionary spending in FY2013 generally was subject to a 5.0% sequestration.

FY2014-FY2017 Nondefense Discretionary Spending Caps

Table A-1 shows the original nondefense discretionary (NDD) spending caps for FY2014-FY2017 established by the BCA. For each of those four fiscal years, the BCA required the caps to be lowered by approximately $37 billion to achieve the necessary reduction in NDD spending.

However, the Bipartisan Budget Act of 2013 (BBA13) amended the BCA by establishing new levels for the FY2014 and FY2015 NDD spending caps, and eliminating the requirement for those caps to be reduced. While the BBA13 caps were set at a level that was lower than the original BCA caps (see Table A-1 ), they were higher than the BCA-lowered caps that they replaced.

The Bipartisan Budget Act of 2015 (BBA15) further amended the BCA by establishing new levels for the FY2016 and FY2017 NDD spending caps, and eliminating the requirement for those caps to be lowered. Once again, the BBA15 caps were set at a level below the original BCA caps for those two fiscal years (see Table A-1 ), but above the BCA-lowered caps that they replace.

The revised NDD caps allowed an additional $26 billion for nondefense programs in FY2016 compared to the previous fiscal year. However, there is a slight increase in NDD appropriations allowed by the FY2017 revised cap level. As shown in Table 19, the revised cap for FY2017 is $40 million above the revised cap for FY2016.

Appendix B. Expired Authorizations of Appropriations