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White House to put Medicare cuts on hold during shutdown

Pay-as-you-go law would force cuts if shutdown lingers until Jan. 24

If the shutdown lingers until Jan. 24, under current law, the OMB would be forced to slice around $839 million from nonexempt programs across the government. (Bill Clark/CQ Roll Call file photo)
If the shutdown lingers until Jan. 24, under current law, the OMB would be forced to slice around $839 million from nonexempt programs across the government. (Bill Clark/CQ Roll Call file photo)

The Trump administration won’t order up a round of cuts in federal benefit programs, primarily Medicare, if the partial government shutdown remains in effect later this month, a senior Office of Management and Budget official said.

If the shutdown lingers until Jan. 24, under current law, the OMB would be forced to slice around $839 million from nonexempt programs across the government. That number represents the figure left on the pay-as-you-go “scorecard” for 2018, specifying the net amount added to the fiscal 2019 deficit by laws enacted last year, excluding emergency spending that is exempt from the calculation.

About 90 percent of the cuts, or $753 million, would come from Medicare, the major health insurance program for the elderly. But the senior OMB official said the administration wouldn’t execute the cuts right away, as the relevant documentation is “on hold” during the shutdown. “Once the lapse is over, we will reassess timing for releasing these documents,” the official said.

Under the 2010 law establishing the statutory pay-as-you-go requirement, if there is a positive scorecard balance at the end of a congressional session, the OMB has “not later than 14 days,” not counting weekends and holidays, to issue a “sequestration order” specifying cuts for the ongoing fiscal year.

The OMB’s latest scorecard balance for last year was $482 million as of Dec. 14, and would rise to $839 million after accounting for enactment of the 2018 farm bill on Dec. 20, based on calculations by CQ.

Independent analysts at the Committee for a Responsible Federal Budget said they’d reached similar conclusions. The senior OMB official, however, said the farm bill estimate was produced by the Congressional Budget Office, which can differ from the White House interpretation. The official also said there were some other minor bills enacted before the end of last year that will have budgetary effects that are part of the calculation.

Also watch: What really happens during a government shutdown, explained

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The stopgap funding bills lawmakers were considering in December to avert the partial shutdown would have delayed the sequestration order until 15 days after the continuing resolution’s Feb. 8 expiration.

The idea was to buy time to enact broader appropriations legislation for the full fiscal year ending Sept. 30 that would wipe the pay-as-you-go scorecard clean, thereby eliminating potential automatic cuts in mandatory programs. House Democrats included such a provision in their six-bill omnibus measure they sent to the Senate last week to reopen eight Cabinet departments and numerous other agencies.

But Senate Republicans have shown no interest in that bill, which President Donald Trump said he would veto. Without either the stopgap bill’s delayed sequester start date or the pay-as-you-go waiver in the larger spending bill, it would place the date of an OMB sequestration order around Jan. 24.

First time for everything

Congress routinely exempts spending increases and tax cuts from pay-as-you-go enforcement, or wipes out the pay-as-you-go scorecard at the end of the year. If the cuts eventually are triggered, it would be the first time since the 2010 law was enacted.

The White House will update its estimates in putting together the next sequestration order. But based on the OMB’s report for a separate fiscal 2019 sequester of mandatory programs required under a 2011 deficit reduction law, Medicare would bear the brunt of the cuts.

The programs targeted by a pay-as-you-go sequester would be similar to those that are cut each year under the mandatory sequester from the 2011 law. In addition to Medicare, those programs include risk adjustment payments to insurers with sicker enrollees under the 2010 health care law, student loan administration, payments to the fund for military retirees, and vocational rehabilitation services for individuals with disabilities, among others.

It would also hit Customs and Border Protection and Immigration and Customs Enforcement operations, which are central to the broader standoff between Democrats and Trump on reopening the government. And it would curb payments to farmers, who are already having trouble as a result of the shutdown getting assistance to cope with lost export markets due to Trump’s tariffs.

Many programs are exempt from sequester, including Medicaid, Social Security, veterans programs, food stamps, federal retiree benefits and unemployment compensation, among others.

But Medicare, which is not exempt, would see the lion’s share of the new cuts because it is so massive. The OMB’s February 2018 sequestration order estimated the program would cost $697.9 billion in fiscal 2019, versus just $80.2 billion for all other nonexempt programs combined. The OMB official said those figures likely would change somewhat as part of the official calculation after the shutdown ends, however.

The $839 million left on the pay-as-you go scorecard for the second session of the 115th Congress would represent about 0.11 percent of the total spending in nonexempt programs for fiscal 2019, based on the OMB’s estimates last February. Applying that percentage reduction to Medicare would produce cuts of roughly $753 million starting in late January, with the remainder spread across the other nonexempt programs.

That’s not much in the context of such a huge benefit program, which is already subject to $14 billion in cuts this year under the 2011 law’s sequester. But it’s likely to come as a surprise to hospitals, doctors and other stakeholders who would see their Medicare reimbursements cut as part of an unrelated fight over funding a wall along the southwest border.

Kellie Mejdrich contributed to this report.

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