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A Democrat-backed Covid Bailout Bill could spark billions in cuts to Medicare and other federal programs, such as those that aid the unemployed and student loan borrowers, if finally passed.
The budget cuts would come into effect in 2022 and last for several years.
Republicans are using the specter of withdrawals to argue against issuing more pandemic aid, which includes stimulus testing of $ 1,400 and more unemployment benefits.
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It is unclear whether the legislature would allow this. Even if they survive, the exact impact of cuts on consumers is uncertain.
The cuts can, for example, automatically increase federal student loan fees, according to the Office of Administration and Budget.
According to household experts, some doctors and hospitals may choose not to accept Medicare because the federal government reimburses lower costs. Vendors can also try to pass additional costs on to consumers.
The cuts are due to a rule – the PAYGO Act – that corrects additions to the federal deficit by automatically withdrawing funds from specific departments and programs.
The pandemic relief effort would increase the federal deficit by $ 1.9 trillion in a decade, according to a Congressional Budget Office memo released Thursday by Director Phillip Swagel.
As a result, Medicare funding would cut by 4%, or $ 36 billion, starting next year, Swagel said. His estimates were in response to a question from the House minority leader Kevin McCarthy, R-Calif.
Further cuts of $ 345 billion would come from a number of other areas designated as “mandatory” federal spending. (That is, they do not include annual Congress funds.)
At stake is funding for items such as student grants, housing programs, tax collection, investor protection and government unemployment. The cuts are typically a few million dollars or less for each line item.
Programs like Social Security, Medicaid, and grocery stamps are exempt from cuts.
This bill will directly harm America’s working class.
Jason Smith, the senior member of the House Budgets Committee, suggested cuts to Medicare would hurt consumers.
“This bill will harm the American working class directly,” Smith, a Republican from Missouri, said Monday during a committee hearing on legislation.
Democrats, including President Joe Biden, believe the federal government should send more aid immediately to Americans to shore up a weak economy and persistent financial troubles for households.
“Will not happen”
Experts are skeptical that the legislature would ultimately let the budget measures come into force.
For one thing, they usually don’t. Congress has overridden the automatic cuts that would have been triggered, for example, by former President Donald Trump’s signature tax cut in 2017. This was also done last year to offset the deficit effect of previous pandemic relief measures.
Not doing them this year would require Republican support. It is likely that the GOP will choose it, experts said. Otherwise, they would also choose to cut funding for things like agricultural subsidies, defense, and customs and border protection.
Additionally, the deficit from Covid relief would essentially wipe out all funding for the above programs, CBO said. (Medicare is an exception – its cuts are capped at 4% while other programs have no cap.)
“That’s not going to happen,” said Barry Anderson, an independent consultant who previously served as a senior officer in the Congressional Budget Office and the Office of Management and Budget. “You will forego it.”
Impact on consumers
The 2010 Pay-As-You-Go Statutory Act – also known as PAYGO – is the balloon deficit protection mechanism.
The deficits are counted at the end of the year and averaged over a period of five or ten years. These averages are canceled each year by automatic withdrawals in other areas with the aim of reducing the impact of a deficit on one bill to $ 0.
In the case of Medicare, reimbursement rates that hospitals, doctors, and other providers were expecting from the federal government would drop 4% across the board, according to William Hoagland, senior vice president at the Bipartisan Policy Center.
That cut would apply for five years each year, CBO said.
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“Over time, more doctors may say, ‘I’m not ready to operate under Medicare’s restrictions and reimbursements,” said Anderson.
Affected providers could somehow increase their costs to compensate for this, he said.
Ironically, consumers would likely see cheaper premiums, said Marc Goldwein, senior vice president and senior policy director of the Committee on Responsible Federal Budget.
That’s because the premiums are calculated based on the cost that would have gone down, Goldwein said.
A 4% cut is so small that it is unlikely that many providers will leave the Medicare network, he added.
The exact impact of the PAYGO rules on student loan fees is also not entirely clear.
However, there are examples of how it could work. For example, the PAYGO rules triggered an automatic 5.7% increase in loan fees this year, according to the Office of Management and Budget.
This helped offset the $ 1.2 trillion expense from the American Taxpayer Relief Act of 2012. The fee increase represented an overall 5.7% reduction in mandatory non-defense programs.
Students may also find it harder to get credit if certain Department of Education programs receive less funding, Anderson said.
“There would be a lot less money to give loan guarantees,” he said. “So a whole bunch of students wouldn’t be able to get loans.”
The Ministry of Education has not returned a request for comment.