Accounting for the Changing Impact of the Federal

Government Including the Affordable Care Act

Benjamin A. MandelBEA Advisory Committee Meeting

Washington, DCMay 10, 2013

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Sources of Change

Defense Spending Military buildups and drawdowns

Historic Transformative Legislation Creation of large-scale social programs

Temporary Programs American Recovery and Reinvestment Act

Disaster Assistance

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Federal Defense Spending

2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013-30%

-20%

-10%

0%

10%

20%

30%

40%

50%

0

10000

20000

30000

40000

50000

60000

70000

80000

Real Consumption Expenditures & Gross Investment

Percent Change From Preceding Quarter in National Defense CE & GI Real National Defense CE & GI

Trend Line

Fiscal Years

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Derivation of NIPA Defense Estimates

Control total (top down) based on outlays data from the Monthly Treasury Statement. DOD Military

OPM and DOD Civilian (retirement benefits)

Energy and a few other small programs Allows the NIPAs to capture changes in defense spending

Sequester impacts embedded in MTS data Individual methodologies for component series (bottom up)

Compensation (possible furlough adjustments)

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Adjustments to Defense Outlays

National Accounting differs from Budget Accounting

Timing

Personnel

Procurement of Equipment

Coverage

Consumption of Fixed Capital

Other smaller adjustments

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Historic Social Program Legislation

Old-Age (Retirement), Survivors, and Disability Insurance

Unemployment benefits Medicare - Health insurance for aged and disabled Medicaid - Federal grants to states for medical

assistance programs Supplemental Security Income - Payments to low-

income people who are either 65 or older, blind, or disabled

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Patient Protection and Affordable Care Act

Ensure health insurance coverage for most U.S citizens

Individual Mandate

Employer

Medicare or Medicaid

Individual direct purchase

Health insurance exchanges

Prohibits exclusions for pre-existing conditions

Improve healthcare treatments and delivery

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Government Services and Funding

Government Support Health Exchanges

Insurance subsidies

Expansion of existing programs – Medicaid and CHIP Government Revenue

Increase existing taxes and reduce certain tax credits

New excise taxes

Penalties and fees

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Several ACA provisions have already begun and related transactions are included in the NIPAs

Transactions are included in our normal source data (Budget, MTS, etc.)

Provisions continue to begin each year 2014 through 2020

BEA’s Analysis of ACA Impact on the Federal Sector of the NIPAs

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BEA’s Analysis of ACA Impact on the Federal Sector of the NIPAs

Classify estimates of ACA spending and revenues into a national accounts framework

Focus on which NIPA transactions are impacted, not estimated values

Source data (fiscal years)

CBO & Joint Committee on Taxation : 2010 – 2012 reports

Estimates a bit outdated, but still useful for analysis

Consistent impacts

OMB outlays and receipts through 2018 (used for allocations)

Lacking detailed data, BEA split estimates of the new Medicare surtaxes 50/50 between contributions for social insurance and personal current taxes

Federal sector perspective Direct impacts of law changes

Changes to existing programs

New transactions

Not multiplier effects

bea.gov

Impact of ACA on NIPA Federal Sector

2010 2011 2012 2013 2014 2015 2016 2017 2018-150000

-100000

-50000

0

50000

100000

Receipts Expenditures Net lending or borrowing

Fiscal Years

Net Lending or Borrowing

Illustration of the estimated ACA impact on federal NIPA transactions based on CBO, JCT, and OMB data.

bea.gov

Federal Total Expenditures - ACA

2010 2011 2012 2013 2014 2015 2016 2017 2018-20000

0

20000

40000

60000

80000

100000

120000

140000

160000

Grants Social Benefits Consumption Expenditures and Gross Investment Subsidies Capital transfers to personsFiscal Years

Illustration of the estimated ACA impact on federal NIPA transactions based on CBO, JCT, and OMB data.

bea.gov

Federal Grants to S&L Governments - ACA

2010 2011 2012 2013 2014 2015 2016 2017 20180

10000

20000

30000

40000

50000

60000

70000

80000

Fiscal Years

Illustration of the estimated ACA impact on federal NIPA transactions based on CBO, JCT, and OMB data.

bea.gov

Grants – Gross ACA Impacts

2014 2015 2016 2017 2018-40000

-20000

0

20000

40000

60000

80000

100000

Increases Decreases

Fiscal Years

Illustration of the estimated ACA impact on federal NIPA transactions based on CBO, JCT, and OMB data.

bea.gov

Federal Social Benefits to Persons - ACA

2010 2011 2012 2013 2014 2015 2016 2017 2018-20000

-10000

0

10000

20000

30000

40000

50000

60000

70000

Fiscal Years

Illustration of the estimated ACA impact on federal NIPA transactions based on CBO, JCT, and OMB data.

bea.gov

Federal Social Benefits – Gross ACA Impacts

2010 2011 2012 2013 2014 2015 2016 2017 2018-100000

-50000

0

50000

100000

150000

Health Insurance Subsidies (Tax Credit) Co-payment assistance Reductions to Medicare Other social benefits

Fiscal Years

Illustration of the estimated ACA impact on federal NIPA transactions based on CBO, JCT, and OMB data.

bea.gov

Health Insurance Subsidies

Subsidized purchase of insurance from government-run exchanges Beginning in 2014

Eligibility: income that does not exceed 400% of the poverty level Social Benefit to Persons

Prepaid refundable tax credit most likely paid directly to the insurer, not the individual

Personal Current Taxes Tax filing: reconciliation of prepaid credit with allowable credit

Either a tax reduction (entitled to more of a subsidy) or tax increase (received too much of a subsidy)

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Federal CE & GI (GDP) - ACA

2010 2011 2012 2013 2014 2015 2016 2017 2018

-1000

0

1000

2000

3000

4000

5000

Consumption Expenditures Gross Investment

Fiscal Years

Illustration of the estimated ACA impact on federal NIPA transactions based on CBO, JCT, and OMB data.

bea.gov

Federal Subsidies - ACA

2010 2011 2012 2013 2014 2015 2016 2017 20180

500

1000

1500

2000

2500

3000

3500

Fiscal Years

Illustration of the estimated ACA impact on federal NIPA transactions based on CBO, JCT, and OMB data.

bea.gov

Federal Capital Transfers to Persons - ACA

2010 2011 2012 2013 2014 2015 2016 2017 20180.0

100.0

200.0

300.0

400.0

500.0

600.0

700.0

800.0

900.0

1,000.0

Fiscal Years

Illustration of the estimated ACA impact on federal NIPA transactions based on CBO, JCT, and OMB data.

bea.gov

Federal Total Receipts - ACA

2010 2011 2012 2013 2014 2015 2016 2017 2018-10000

0

10000

20000

30000

40000

50000

60000

70000

Contributions for government social insurance Excise taxes Current Transfers Receipts Personal taxes

Corporate Taxes

Fiscal Years

Illustration of the estimated ACA impact on federal NIPA transactions based on CBO, JCT, and OMB data.

bea.gov

Federal Receipts of Contributions for Social Insurance - ACA

Additional Medicare hospital insurance surtax of 0.9% on earned income in excess of $200,000/$250,000 (unindexed)

Note: BEA used a 50/50 split of an estimate of the total new Medicare HI surtaxes to allocate the surtaxes between contributions and personal current taxes to illustrate the impact on the component series.

2010 2011 2012 2013 2014 2015 2016 2017 20180

2000

4000

6000

8000

10000

12000

14000

16000

18000

20000

Contributions for Government Social Insurance

Fiscal Years Illustration of the estimated ACA impact on federal NIPA transactions based on CBO, JCT, and OMB data.

bea.gov

Federal Excise Taxes - ACA

2011: Annual fee on manufacturers and importers of branded drugs 2013: 2.3% excise tax on importers and manufacturers of certain medical devices 2014: Annual fee on health insurance providers 2018: 40% excise tax on high cost health “Cadillac” plans

2010 2011 2012 2013 2014 2015 2016 2017 20180

5000

10000

15000

20000

25000

30000

35000Excise Taxes

Branded drugs Medical devices Other excise taxes Health insurance providers High cost health insurance plans

Fiscal Years

Illustration of the estimated ACA impact on federal NIPA transactions based on CBO, JCT, and OMB data.

bea.gov

Current Transfer Receipts - ACA

Business Mandate: Insurance coverage for employees of businesses with more than fifty full-time workers.

Individual Mandate: Most U.S. citizens and legal residents required to have “minimal essential coverage” for themselves and their dependents.

2010 2011 2012 2013 2014 2015 2016 2017 20180

2000

4000

6000

8000

10000

12000

14000

16000

Transfer receipts from businesses Transfer receipts from persons

Fiscal Years

Illustration of the estimated ACA impact on federal NIPA transactions based on CBO, JCT, and OMB data.

bea.gov

Federal Personal Current Taxes - ACA

2010 2011 2012 2013 2014 2015 2016 2017 2018-30,000

-20,000

-10,000

0

10,000

20,000

30,000

Health Insurance Subsidies (Tax Credit) Hospital Insurance Tax on Unearned Income Other personal taxes impactsFiscal Years

Illustration of the estimated ACA impact on federal NIPA transactions based on CBO, JCT, and OMB data.

2013: new 3.8% surtax on investment income for taxpayers with AGI in excess of $200,000/$250,000 (unindexed).

Note: BEA used a 50/50 split of an estimate of the total new Medicare HI surtaxes to allocate the surtaxes between contributions and personal current taxes to illustrate the impact on the component series.

bea.gov

Federal Taxes on Corporate Income – ACA

2010 2011 2012 2013 2014 2015 2016 2017 2018-3,000

-2,000

-1,000

0

1,000

2,000

3,000

Fiscal Years

Illustration of the estimated ACA impact on federal NIPA transactions based on CBO, JCT, and OMB data.

bea.gov

ACA Analysis – Future Considerations

The implementation of the ACA will lead to changes in the current estimates of impacts

Some programs may be modified or eliminated Unclear exactly what actions individuals and employers will

take regarding health insurance. Impacts on other sectors of the NIPAs?

State and Local Governments

Personal Consumption Expenditures (Current dollars and Prices)

Corporate Profits

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2013 Comprehensive Revision - NIPAs

Changes in economic accounting definitions and classifications

Capitalization of research and development

Accrual treatment of defined benefit pension plan transactions