Sarah Kliff for The Washington Post reports that the Affordable Care Act is funded with a combination of spending cuts from other health care programs, taxes and other initiatives. These cuts and taxes occur from 2013 to 2022. Noam Levey for the Los Angeles Times notes that the Obama administration made billions of dollars available to insurance companies if they lose money because of the Affordable Care Act.
Spending cuts total $741 billion over 10 years, and reductions in Medicare payment rates account for $415 billion in cuts, according to Kliff. Another $156 billion comes from cuts in Medicare Advantage payments. Generic "other cuts" amount to $114 billion until 2022. Revenue for the Affordable Care Act comes from many sources. Kliff explains $318 billion is generated from a 3.8 percent tax on individuals who earn more than $200,000. This tax pays for Medicare's hospital insurance. Another $216 billion comes from increased insurance coverage, while $111 billion is raised from taxes on so-called "Cadillac" plans. One of the smaller taxes that pays for health insurance is a 10 percent tax on indoor tanning booths.
A three-year revenue program initiated by the Obama administration has been called a "bailout" for insurance companies that lose money due to increased premiums and fewer customers because of the new law. Levey reveals that several insurance companies will see rate increases because many patients are older and sicker than originally anticipated.