Who pays for ACA? A look at the facts

Sep 10

Written by: The Tracker
9/10/2012 8:18 AM  RssIcon

A few weeks ago in The Tracker, we highlighted components of the Affordable Care Act that are or will be effective soon. New benefits for women, the elderly, and uninsured young adults—it all sounds good, but who will pay for it? That is the billion-dollar question.

Unfortunately, at a time when politics colors everything, straight answers are hard to come by. Does the ACA really cut Medicare by $700 billion to fund other provisions of the bill? It depends on who you ask. Politicians aren’t the only ones guilty of positioning the act to suit their own agendas. Straightforward analyses by the media are hard to come by, as well. But a recent Associated Press article did an excellent job of spelling out the answers in clear, concise language. Here are some of the key points:

- The law’s biggest tax increases are aimed at “the 2 percent”—the approximately 2.5 million households that make more than $200,000 annually—and these taxes are estimated to raise $318 billion over 10 years to fund the ACA. The increases include a 0.9% Medicare tax on wages above threshold amounts and an additional 3.8% tax on investment income.

- Insurers, drug companies, medical device makers—companies expected to profit as more Americans get insurance through the ACA—will share in annual fees to the tune of $165 billion over 10 years.

- $33 billion over 10 years will come from limits to annual contributions to Flexible Spending Accounts and penalties for using the money for non-medical reasons.

- Nearly $19 billion will come from increased thresholds for families who take tax deductions on medical or dental bills.

- Insurers providing “Cadillac” plans above average thresholds for premiums will contribute $111 billion over five years.

- A 10% tax on the price of visiting tanning salons is expected to raise $1.5 billion over 10 years.

At a time when fact-checking the statements of politicians looks like a promising career choice, it is refreshing to see a factual, no-nonsense account of the ACA’s funding basics. How you feel about the provisions, of course, is your choice. A Reuters poll after the Supreme Court decision in June showed increasing public support for the act, although the majority of voters remain opposed to it. The survey showed that, among all registered voters, support for the law rose to 48%, up from 43% before the Court’s decision. Opposition dropped from 57% to 52%.

Photo via the Associated Press: Evan Vucci



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The Tracker is an information hub for busy healthcare professionals who need answers to questions about medical billing, physician practice management and related business services. It offers news, insights and commentary from leading experts in the field today.

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