For a long time, one of Congress’s unwritten rules held that lawmakers should try to avoid cutting Medicare to pay for other programs unrelated to health care. That axiom has been flouted in recent years, and a law signed by President Obama just days ago could push it further into the past.
Congress has proposed a $700 million Medicare cut to help pay for extending the Trade Adjustment Assistance program, which funds job training and placement for American workers who have lost their jobs because of foreign trade, into 2021. The bill, a Democratic priority, is moving in tandem with the more high-profile fast-track trade authority bill, part of a deal negotiated by Democratic Sen. Ron Wyden with two top Republicans, Sen. Orrin Hatch and Rep. Paul Ryan.
The size of the cut is a relative drop in the bucket for a program that currently spends about $600 billion annually, but the trade bill still represents a worrisome precedent for lobbying groups because it would use Medicare cuts to pay for non-Medicare-related spending. There is a small health care component to the bill, but it costs much less than the $700 million in offsets taken from the insurance program.
“The thinking behind that is we need to find a way to pay for it,” said GOP Rep. Dave Reichert, who introduced the TAA bill in the lower chamber. “It’s tough to find pay-fors, so we work hard to find a way to pay for it, and that’s what we came up with.”
This isn’t the first time that Congress has proposed cutting Medicare to fund other programs, but lobbying groups with Medicare interests are scared it will become more and more routine.
Lawmakers approved $1.2 billion in Medicare reductions to help pay for tax-preferred savings accounts for disabled people during last year’s lame-duck session. The 2013 Ryan-Murray budget agreement also incorporated some offsets from the program.
One health care lobbyist, who asked to remain anonymous, said Congress is using Medicare as a “f—king piggy bank” to pay for the trade bill, repeatedly pointing out that the insurance program is funded by taxes specifically earmarked for it.
A coalition of provider groups, including the powerful doctor and hospital lobbies, lamented in a letter to senators last week that the trade bill would set “a precedent that we believe is unwise” because it uses “Medicare cuts to pay for non-Medicare related legislation.” A seniors’ group, the National Committee to Preserve Social Security and Medicare, warned that “the current course being plotted by Congress will lead to a death by a thousand cuts.”
The new problem for those who want to protect Medicare cash is, ironically, the “doc fix” deal that Congress overwhelmingly passed this month and many special interests had long sought, which repealed the “sustainable growth rate” formula for physician payments. Before that deal, lobbyists could argue that Congress needed to save any potential Medicare offsets to pay for a temporary or permanent doc-fix patch that would avert deep payment cuts to doctors, said Julius Hobson, a health care lobbyist with the Polsinelli law firm. The permanent fix costs $210 billion over 10 years.
But that’s no longer an issue, and the trade bill signaled to K Street that Congress is becoming more comfortable turning to Medicare to pay for other programs. “Now what you’re trying to do is get them to stop,” Hobson said.
“It’s certainly possible this will happen more and more in the post-SGR world,” said Loren Adler, research director at the Committee for a Responsible Federal Budget, which focuses on deficit reduction and entitlement reform.
Part of the reason, he said, is that Congress has already “cut pretty close to the bone” in other areas of the federal budget. That means Medicare, which spends a lot of money but which Congress has historically been reluctant to touch, is becoming a more likely place for lawmakers to find savings.
“Hence they’re now turning to Medicare, which, though popular, also presents a lot of opportunities to find savings in not overly controversial ways,” Adler said. The cuts in the trade bill, which would increase the 2011 automatic budget cuts known as sequestration in fiscal year 2024, would reduce reimbursements to providers but not directly affect beneficiaries. The latter would be much more of a political risk.
The trade bill presents Democrats with a thorny problem that could recur as long as the GOP controls Congress: They are loathe to vote for any Medicare cuts, but they are also big proponents of TAA; Republicans are more ambivalent about the program. Democratic Sen. Robert Casey described it as a “take-it-or-leave-it” scenario.
It is still possible that House Republicans could negotiate with Democrats to either lessen or eliminate the Medicare cuts in the trade bill, Reichert said. Democratic Sen. Mark Warner has floated an amendment that would swap the Medicare cuts for tougher real-estate tax-reporting requirements that would increase revenue, and Warner told National Journal that he thought it would attract bipartisan support if it came up for a vote.
Reichert also emphasized that the cuts wouldn’t take effect until the second half of fiscal year 2024. “There’s a lot of things that Congress does between 2015 and 2024,” he said. “That’s 10 years away.”
But the long timeline wasn’t much solace to those on the other side of the aisle wary of making it a habit.
“Everybody says we’ll deal with them when we get there, and then all of a sudden we’re there and you have deeper cuts,” said Democratic Sen. Ben Cardin. “It’s not good.”