House Approves FY 2012 Compromise Budget, Deficit-Reduction Plan

On Monday, the House voted 269-161 to approve the fiscal year 2012 budget and deficit-reduction agreement (S 365), sending the measure to the Senate for a final vote at noon on Tuesday, the New York Times reports (Hulse, New York Times, 8/1).

Under the agreement -- which President Obama and congressional leaders struck on Sunday -- federal discretionary spending would be cut by a total of about $2.4 trillion over the next decade, while the debt ceiling would be raised in two stages. The plan would:

• Enact an immediate debt-limit increase of $900 billion, followed by an increase of between $1.2 trillion and $1.5 trillion at a later time, at the president's request;
• Require a new 12-member bipartisan congressional panel to develop another deficit-reduction package with $1.5 trillion in cuts, which Congress would have to approve by late December of this year; and
• Trigger $1.2 trillion in automatic spending cuts, which would be evenly distributed between defense and non-defense purposes, should the federal government reach certain spending caps.

A House GOP summary noted that the automatic spending cuts would apply only to Medicare -- not Medicaid, other entitlement programs or civil or military spending -- while a White House fact sheet indicated that the cuts to Medicare would be limited to 2% of the program's cost (California Healthline, 8/1).

According to the AP/San Francisco Chronicle, the legislation is "virtually assured" to pass in the Senate, and the White House has promised that Obama will sign it into law (Taylor, AP/San Francisco Chronicle, 8/2).

Deal's Effects on Health Care, Reform Law Programs in Question

The budget and deficit-reduction agreement's effects on Medicare, Medicaid and the federal health reform law could be significant in the coming years, according to lawmakers, health policy experts and analysts (Reichard, CQ HealthBeat, 8/1).

Should the trigger mechanism for automatic spending cuts be engaged, the deal would exempt Medicaid and protect Medicare from deep spending reductions. However, the bipartisan, bicameral advisory committee that would be created under the measure to recommend further deficit reductions is not bound by such stipulations, policy observers warn (McCarthy, National Journal, 8/1).

Paul Van de Water from the Center on Budget and Policy Priorities said, "There's no limit on what the committee can look at," adding that "Republicans are going to be promoting their block grant, the administration will still be promoting its blended rate" in Medicaid, "[a]nd who knows what might be discussed with regard to the health reform legislation" (CQ HealthBeat, 8/1).

Robert Laszewski, a health care industry consultant, noted that the negotiators in the debt deal "haven't really solved anything -- they have only set up a procedure to make cuts" (Alonso-Zaldivar, AP/Miami Herald, 8/2).

Although many lawmakers have said that sitting on the committee would be politically risky, some see the panel as an opportunity to overhaul entitlement programs and are vying for seats, Politico reports.

A Senate GOP aide said, "If you're someone who fancies themselves a vice presidential candidate or reformer, jumping on this committee can be seen as an important way to build your bona fides on entitlement reform," adding, "This is an attractive opportunity for a lot of Republicans" (Wong/Haberkorn, Politico, 8/1).

Health Care Providers Brace for Deep Medicare Cuts

Although the potential cuts to Medicare providers are limited, any cuts under the debt deal would come on top of a 6% cut enacted to offset the cost of the federal health reform law, the AP/Miami Herald reports. According to the AP/Herald, the hospital industry -- which agreed to $150 billion in spending cuts to help subsidize the cost of expanding health coverage to more uninsured U.S. residents -- has expressed frustration with new developments (AP/Miami Herald, 8/2).

American Hospital Association President Richard Umbdenstock said, "Hospitals have repeatedly demonstrated a willingness to accept shared sacrifice and do what is best for our country, but our first commitment is to patients, whose access to care could be curtailed by further cuts to Medicare funding for hospital care."

Chip Kahn, president and CEO of the Federation of American Hospitals, said his group opposes the debt deal because it "sets in motion billions of dollars in arbitrary Medicare funding cuts." Kahn described the deal's reported protections for seniors as "illusory," adding, "Reducing critical Medicare payments to community hospitals will affect the ability of caregivers to ensure access to the timely care beneficiaries deserve and expect."

Meanwhile, some policy experts note that the potential spending cuts also would be in addition to a scheduled cut to Medicare physician payments in January.

Julius Hobson, a senior policy adviser for Polsinelli Shughart, said, "It has always been my concern that if you didn't get a comprehensive deal now with a doc fix in it ... we would be looking at a double hit," adding, "In essence, they’ll be doing a debt deal at the same time we're dealing with the doc fix" (DoBias, Politico, 8/1).

According to the AP/Herald, health care advocates are preparing to mobilize to block or contain the scope of possible spending cuts, and one way to achieve that will be to bring revenue-generating tax hikes back into the debate (AP/Miami Herald, 8/2). However, tax increases favored by Democrats emerged as a key sticking point in the budget and debt-limit debate (California Healthline, 8/1).