An October 1, 2012 report from the Congressional Research Service (CRS) analyzes the impact of impending across-the-board cuts to Federal spending known as “sequestration” on implementation of the Affordable Care Act (ACA).  Overall, the report finds that sequestration would have a relatively low impact on ACA-related spending because much of it remains exempt from the sequester.  The Budget Control Act of 2011 (BCA) requires spending cuts during FYs 2013-2021 in order to shave $2.1 trillion from the federal budget deficit.

The BCA specifically exempts Medicaid from sequestration.  Because much of the ACA’s expansion of insurance coverage results from an expansion in Medicaid eligibility, the report finds that funding to support such an expansion will be exempt from sequestration.  Moreover, refundable tax credits, including those established by the ACA to subsidize the purchase of insurance by individuals who do not qualify for Medicaid, also are exempt from sequestration.

In general, the report finds, discretionary spending authorized by the ACA will be subject to sequestration in FY 2013.  For subsequent years, the BCA establishes limits on overall federal spending.  The report notes that ACA-related discretionary spending in those years is likely to be reduced as “Congress and the President . . . determine through the annual appropriations process which accounts are to be reduced, and by how much, in order to meet those limits.”  The report also notes, however, that the cuts apply only to “new budget authority” for a given year; that is, money that Congress has specifically made available for use beginning in FY 2013 or later.  The cuts will not apply to funds appropriated under the ACA for use beginning in a prior fiscal year (i.e., FYs 2010 and 2011) that remain unspent.  Such “unobligated balances” include funding to the Pre-Existing Condition Insurance Plan.

The CRS report is available here.