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. Under the BCA, the
reductions would be achieved by a combination of sequestration (i.e., an
automatic across-theboard cancellation of budgetary resources) and
lowering the caps on discretionary spending. The President was required to
order a sequestration of FY2013 budgetary resources on January 2, 2013.
However, that deadline was delayed until March 1, 2013, by the American
Taxpayer Relief Act of 2012.
The potential impact of spending reductions triggered by the BCA on health
reform spending under the Patient Protection and Affordable Care Act (ACA)
would appear 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 would be exempt from any reduction, and
cuts to Medicare would be 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 would be fully sequestrable. However, for any given
fiscal year in which sequestration was ordered, only new budget authority for
that year would be reduced. Unobligated balances carried over from
previous fiscal years would be exempt from sequestration.
ACA is likely to affect discretionary spending 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 the
policies and programs established by ACA. Those costs will have to be
funded largely through the annual appropriations process. ACArelated discretionary
spending would, in general, be fully sequestrable.
Date of Report: January 17, 2013
Number of Pages: 24 Order Number: R42051 Price: $29.95
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