Before the House passed a President Donald Trump-backed reconciliation bill altering the shape of federal health programs, the Congressional Budget Office (CBO) released a report warning the bill’s contents would trigger cuts to Medicare.
The report (PDF) indicated the bill would contribute to forced cuts to Medicare by $490 billion from 2027 to 2034. The findings alarmed observers who expected Medicare would not be touched by lawmakers and affirmed suspicions from critics the program would finally be on the chopping block as they expected.
Conventional wisdom indicates cutting Medicare and Medicaid leads to political vulnerabilities. Trump seems to agree, this week telling Republicans behind closed doors, in no uncertain terms, to not cut Medicaid—though he often frames the issue by saying the bill roots out waste, fraud and abuse. Instinctively, Medicare is seen as even more off-limits.
So the CBO scoring generated a wave of outrage and backlash when it was released, since it seemed to indicate the opposite.
Budgetary and policy analysts across the ideological spectrum told Fierce Healthcare that while the report is factually correct, it is unlikely to materially take effect.
“I consider this a nothingburger,” said Jessica Riedl, a senior fellow at the Manhattan Institute.
“Congress always waives it, and they’ve been waiving it consistently over the years,” echoed Bill Hoagland, senior vice president at the Bipartisan Policy Center.
Here’s the situation: Democratic lawmakers asked the CBO for budgetary impacts to the Trump budget bill, in accordance with the Statutory Pay-As-You-Go Act of 2010 (Statutory PAYGO). The mechanism ensures a net increase of the deficit by the end of the year will prompt the Office of Management and Budget to sequester funds from certain federal programs, otherwise known as automatic spending cuts.
Enacting this bill would increase the deficit by $2.3 trillion over a 10-year period, it estimated May 20. Under law, Medicare spending would be reduced by a maximum of 4%, or $490 billion.
Hospitals and insurers would only get reimbursed 94 to 96 cents on the dollar, said Bobby Kogan, senior director of federal budget policy for the Center for American Progress.
In practice, Congress only rarely chooses to not waive this mechanism. It can choose to nullify the sequestration by waiving the rule or clearing the PAYGO scorecards.
Analysts say the statutory PAYGO mechanism should be removed or modified because it’s not working as intended.
“Every year Congress expands deficits, and every year they append language to the final spending bill of the year canceling the sequestration,” said Riedl. “So while the tax bill—like nearly every deficit-expanding bill—could technically put Medicare on the path to sequestration, there is no chance Congress would let that happen.”
Just because Medicare cuts seem far-fetched under this mechanism, it doesn’t mean Medicare won’t still be impacted under the reconciliation bill, said Jeannie Fuglesten Biniek, Ph.D., an associate director for the program on Medicare policy at the KFF.
One provision puts a moratorium on a Biden-era rule meant to reduce barriers to enrollment in Medicare Savings Programs. These programs are run by state Medicaid programs. It’s expected ceasing implementing them will impact more than 1 million beneficiaries and save the feds $90 billion.
Medicare coverage will be restricted for many groups of people listed as “lawfully present” in the country, like refugees and asylees. Currently, they receive Medicare benefits because they meet the required number of years worked in the country and are here legally. Their benefits would be terminated within one year of the bill’s signing into law.
It’s currently estimated the bill will cut Medicaid by $715 billion, though the legislation has been amended several times this week alone and will likely face new changes in the Senate. Medicaid adults would be subject to new mandatory cost-sharing requirements of up to $35, and state budgets would be severely impacted, causing further disruptions.
Millions enrolled in Medicaid or on the Affordable Care Act exchanges would lose coverage, especially if the enhanced premium tax credits are not extended by the end of the year.