This is definitely a case of delayed pain—that is, the across-the-board budget cuts that took effect March 1. These automatic spending reductions will take effect over the next 10 years, will total $1.2 trillion, and will apply equally to defense and non-defense spending. This, however, doesn’t mean there won’t be pain, although Congressional leaders and the President are meeting to try to minimize the pain.
Why is this happening? It came initially from Washington’s tendency to spend money and put off paying the bills—and more directly, from its ineptitude at decision-making. Budget sequestration was invented to make Congress and the White House agree to on a plan to reduce the deficit. They still haven’t done that, so we now have sequestration.
Actually, sequestration was supposed to take effect January 2012. But Congress and President Obama gave themselves an extension until January 2013 as the time the cuts were supposed to take effect—thus giving themselves another (election) year to negotiate. On deadline day, however, Washington granted itself another extension, along with an extension of most Bush-era tax rates, until March 1, 2013—a date that has come and gone. So it looks like we’d better take stock of the situation.
The sequester won’t touch many elements of the social safety net. It won’t touch Social Security, programs administered by the Veterans Administration, Medicaid, Children’s Health Insurance Program (CHIP), welfare (Temporary Assistance for Needy Families), Pell grants, food stamps (Supplemental Nutrition Assistance Program), or Medicare Part D low-income subsidies. Despite Cassandra-like predictions of disaster and hand-wringing over military cuts, things could be worse. Or so it seems…unless the economy tanks or Moody’s or some other ratings agency gets it in its head to downgrade the Unite States’ credit rating again as one more indication that our government is inept.
Ultimately, the execution and impact of automatic spending reductions will depend in large part on the legal interpretations and actions taken by Office of Management and Budget. The sequester will reduce Medicare spending by about $100 billion over 10 years. It could be much worse, as President Obama indicated that he’s willing to cut $400 billion from Medicare during the same period. Nonetheless, the sequester will affect healthcare because it will result in the following:
- Medicare and other mandatory health programs will see 2% across-the-board cuts. That 2% will be cut in the form of lower payments to doctors, hospitals, and private insurers.
- Mental health benefits will decrease for more than 373,000 seriously mentally ill adults and seriously emotionally disturbed children, which could lead to increased hospitalizations and homelessness. Moreover, about 8,900 homeless persons with serious mental illness might not receive the vital support needed for recovery. Also, admissions to inpatient facilities for people in need of addiction services may be reduced by 109,000, and almost 91,000 fewer people would receive substance abuse treatment services.
- About 600,000 women and children will no longer be eligible for the Special Supplemental Nutrition Program for Women, Infants, and Children (WIC) program, a low-income nutrition assistance program for women and children.
- Cuts to the Centers for Disease Control and Prevention (CDC) will translate to approximately 424,000 fewer HIV tests conducted by CDC’s health department grantees.
- $400 million will be cut from the State Department’s Global Health Program, including $380 million from the U.S. President’s Emergency Plan for AIDS Relief.
- The cuts may result in about 3,000 fewer inpatient admissions and 804,000 fewer outpatient visits provided in Indian Health Service and Tribal hospitals and clinics.
Some parts of the Affordable Care Act are likely to be protected. Tax credits to help lower- and middle-class Americans pay their health insurance premiums (a separate program from the cost-sharing subsidies) most likely would be preserved under previous definitions of refundable income tax credits, according to congressional aides and other budget experts.
In the end, however, nobody knows exactly how it will play out. If you need to know right now, click on www.whitehouse.gov/sites/default/files/omb/assets/legislative_reports/stareport.pdf to read the OMB Report Pursuant to the Sequestration Transparency Act of 2012. The rest of us have almost a decade to find out.