Despite President Trump’s “no touch” promise regarding Medicare, the GOP’s recently passed tax cuts — and resulting predicted deficits — build in significant threats of immediate major reductions to Medicare.
Currently, 57 million enrollees and families are at risk of program cuts of $25 billion just for 2018, and more than $250 billion through 2027.
The potential impact to Medicare, and many other federal programs, results from the projected $1.5 trillion deficit size increase. Large deficits over a five- or 10-year period automatically trigger a mandatory “sequestration” process that shrinks federal program spending across wide parts of the federal budget to cover or “match” the new deficit amounts.
Such spending “sequestration” is decreed by a statutory process known as “Pay-Go.” The first statutory “Pay-Go” version originated in 1990. The Bush tax cuts of 2003, passed after the “Pay-Go” process, lapsed in 2002, with the current “Pay-Go” process being reestablished in 2007.
To avoid Pay-Go spending sequestrations, Congress may take specific steps to avoid or “waive” them. Such waivers require a majority of the House and a Senate 60-vote supermajority. To date, the GOP has demonstrated no such efforts — with the remaining time to do that running extremely short.
According to the nonpartisan Congressional Budget Office (CBO), if Congress fails to provide express waiver of Pay-Go before the session ends this month, other federal officials “would be required to issue a ‘sequestration’ order within 15 days of the end of the session of Congress to reduce federal spending in fiscal year 2018.”
For 2018 alone, that amounts to $136 billion dollars in federal spending reductions.
Authority to determine whether sequestration is required (and how to make the necessary cuts) rests solely with President Trump’s Office of Management and Budget (OMB).
But the Pay-Go process exempts certain federal programs. Medicare program cuts are limited to 4 percent annually, which amount to $25 billion a year.
Direct individual Medicare benefits are exempt from sequestration.
This leaves $25 billion of other potential necessary Medicare program cuts. These could possibly including reduction in fee payment to providers, such as hospitals and physicians. New 4 percent fee cuts would follow a reduction of 2 percent, implemented in 2013, by Congress.
Such fee cuts disproportionately impact rural areas having sizeable Medicare populations, but which lack multiple health facilities or many providers.
Providers leave or close.
This last Friday, until the last moment for appeasing hold-out Republican Senators was at hand, GOP leaders had avoided discussion of Medicare. They then issued the following joint statement: “ ...Critics of tax reform are claiming the legislation would lead to massive, across-the-board spending cuts in vital programs — including a 4 percent reduction in Medicare — due to the Pay-Go law enacted in 2010. This will not happen ...”
However, no other details were provided.
But something will happen.
Pay-Go requires a decision before December’s end, and the GOP faithful are staking out positions. Last Wednesday, Republican Sen. Mark Rubio (Fla.) stated, “We have to ... institut[e] structural changes to ... Medicare for the future.”
Will the pharmaceutical industry accept “structural changes” to Medicare Part D drug programs that account for $90 billion in annual payments? Negotiating drugs — such as the V.A. does and which Medicare is prevented from doing — easily provides a 30 percent price discount, paying Medicare’s sequestered amount of $25 billion.
Raising the Medicare age from 65 to 67 only makes the Medicare “risk pool” more expensive per capita to operate. As one Portland physician recently said to me, “Once Americans join Medicare, they get access to the great healthcare they couldn’t afford while they were young.”
As David Certner, legislative counsel for AARP just stated in voicing concern for the tax bill impacts on Medicare: “We create these large deficits and ... pressure for cuts to Medicare ... and everything will be on the table...”
Or perhaps he should have said “dart board”
One hopes that game will not be held behind closed doors and without a single committee hearing.
If the earlier tax cut process was a prelude to more behind-the-scenes “structural changes,” and the broader issue of making America healthier again, the public will need to be vigilant.
(Rand Dawson is a Siltcoos resident with long interest in health care reform. He is a retired litigation attorney who also represented insurance companies.)