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The Affordable Care Act: How Is It Financed?

The Affordable Care Act (ACA) contains many important protections and valuable benefits for both consumers and health care providers. Many of these items, such as generous tax credits to help individuals and small businesses purchase health insurance, a sizeable expansion of the Medicaid program, and a more generous Medicare prescription drug benefit will require additional spending from the federal government. However, Congress and President Obama designed the ACA so that it would not add to the federal deficit; in fact, the Congressional Budget Office (CBO) projected in 2012 that the ACA would reduce the federal deficit by $109 billion from 2013 – 2022.[1] To prevent the ACA’s benefits from causing additional deficit spending, the law contains several provisions that raise revenue in new fees and taxes, which yield roughly half of the savings. The remaining half results from spending reductions in Medicare and Medicaid. Since the ACA became law, a great deal of discussion and debate, most recently in the presidential campaign, has focused on the ACA’s Medicare savings provisions—an important piece of how the law is financed. This brief explains this and the other specific elements of the law that raise revenue or produce savings to finance, or “pay for,” the important benefits that the law provides.

For the full report: The Affordable Care Act: How Is It Financed? The Affordable Care Act: How Is It Financed?.pdf

 


[1] Congressional Budget Office. 2011. Letter to the Honorable John Boehner Providing an Estimate for H.R. 6079, the Repeal of Obamacare Act. Available at: http://www.cbo.gov/publication/43471

 

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