CBO estimates discretionary spending for PPACA could exceed $115B

The new policies established by the Patient Protection and Affordable Care Act (PPACA) will cost federal agencies at least an estimated $115 billion between 2010-2019 to implement, in the form of explicit authorizations for future appropriations for a variety of grant and other program spending, according to the Congressional Budget Office (CBO).

The CBO has released some additional information about the potential effects of H.R. 3590, PPACA, on discretionary spending. This information updates and expands on the analysis of potential discretionary spending under PPACA that CBO issued on March 15.

“Potential discretionary costs under PPACA arise from the effects of the legislation on a variety of federal programs and agencies. The law establishes a number of new programs and activities, as well as authorizing new funding for existing programs,” CBO Director Douglas W. Elmendorf wrote to Congressman Jerry Lewis, ranking member on the House Committee on Appropriations.

“By their nature, however, all such potential effects on discretionary spending are subject to future appropriation actions, which could result in greater or smaller costs than the sums authorized by the legislation. Moreover, in many cases, the law authorizes future appropriations but does not specify a particular amount.”

CBO stated it does not have a comprehensive estimate of all of the potential discretionary costs associated with PPACA, but can provide information on the major components of such costs. Those discretionary costs fall into three general categories:

• The costs that will be incurred by federal agencies to implement the new policies established by PPACA, such as administrative expenses for the Department of Health and Human Services and the Internal Revenue Service for carrying out key requirements of the legislation;
• Explicit authorizations for future appropriations for a variety of grant and other program spending for which the act identifies the specific funding levels it envisions for one or more years; and
• Explicit authorizations for future appropriations for a variety of grant and other program spending for which no specific funding levels are identified in the legislation.

CBO estimates authorized costs in the first two categories is to exceed $115 billion over the 2010-2019 period. “We do not have an estimate of the potential costs of authorizations in the third category,” Elmendorf wrote.

CBO previously issued an estimate of the direct spending and revenue effects of PPACA, in combination with the Reconciliation Act of 2010, which amended it. CBO estimated that those two laws, in combination, would produce a net reduction in federal deficits of $143 billion over the 2010-2019 period as a result of changes in direct spending and revenues.

The administrative and other costs for federal agencies to implement the act’s provisions will be funded through the appropriations process. CBO stated major costs for such implementation activities will include:

• Costs to the Internal Revenue Service (IRS) of implementing the eligibility determination, documentation, and verification processes for premium and costsharing credits. CBO expects that those costs will probably total between $5 billion and $10 billion over 10 years.
• Costs to HHS, especially the Centers for Medicare and Medicaid Services, and the Office of Personnel Management for implementing the changes in Medicare, Medicaid, and the Children’s Health Insurance Program, as well as certain reforms to the private insurance market. CBO expects that those costs will probably total at least $5 billion to $10 billion over 10 years.