Covid’s relief bill could trigger cuts in Medicare, student loan programs

A Democratic-backed Covid relief bill could trigger billions of dollars in cuts in Medicare and other federal programs, such as those supporting unemployed workers and student borrowers, if it is finally approved.

The funding cuts would take effect in 2022 and would last for several years.

Republicans are using the spectrum of retractions to argue against issuing more aid for the pandemic, which includes $ 1,400 stimulus checks and more unemployment benefits.

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It is not clear that lawmakers would allow them to occur. Even if they survive, the exact impact of the cuts on consumers is uncertain.

The cuts can automatically raise rates on federal student loans, for example, according to the Office of Management and Budget.

Some doctors and hospitals may choose not to accept Medicare due to lower federal government reimbursements, according to budget experts. Providers can also try to pass the extra costs on to consumers.

The cuts are due to a rule – the PAYGO Act – which corrects additions to the federal deficit by automatically pulling funding from certain departments and programs.

The pandemic aid measure would increase the federal deficit by $ 1.9 trillion over a decade, according to a memo from the Congressional Budget Office issued on Thursday by director Phillip Swagel.

As a result, Medicare financing would be reduced by 4%, or $ 36 billion, starting next year, said Swagel. His estimates were in response to a question from the minority leader in the House, Kevin McCarthy, R-Calif.

Another $ 345 billion in cuts would come from a range of other areas designated as “mandatory” federal spending. (This means that they do not involve annual appropriations from Congress.)

At stake is the financing of items such as student aid, housing programs, tax collection, investor protection and state unemployment operations. The reductions generally amount to a few million dollars or less for each line item.

Programs such as Social Security, Medicaid and food stamps are exempt from cuts.

Congressman Jason Smith, a senior member of the House Budget Committee, suggested that Medicare cuts would hurt consumers.

“This bill will directly harm America’s working class,” said Smith, a Missouri Republican, on Monday during a committee hearing on the legislation.

Democrats, including President Joe Biden, believe that the federal government should send more assistance to Americans immediately to sustain a slow economy and continuing financial problems for families.

Experts are skeptical that lawmakers would allow budgetary measures to take effect.

On the one hand, they usually don’t. Congress overturned the automatic cuts that would have been triggered by ex-President Donald Trump’s tax cut in 2017, for example. It also did so last year to cancel the deficit effect of previous measures to aid the pandemic.

Abandoning them this year would require Republican support. The GOP is likely to choose to do so, experts say. Otherwise, they would also be choosing to reduce funding for things like agricultural subsidies, defense and border and customs protection.

In addition, Covid’s deficit of relief would basically eliminate all financing for the programs mentioned, CBO said. (Medicare is an exception – its cuts are limited to 4%, while other programs do not have a limit.)

“This is not going to happen,” said Barry Anderson, an independent consultant who previously served as a senior official at the Congressional Budget Office and the Office of Management and Budget. “They will resign.”

The statutory Pay-As-You-Go Act of 2010 – also known as PAYGO – is the mechanism designed to protect against growing deficits.

Deficits are computed at the end of the year and averaged over a five or ten year window. These averages are canceled by automatic setbacks in other areas each year, with the aim of reducing the impact of an account deficit to $ 0.

In the case of Medicare, the reimbursement rates that hospitals, doctors and other providers expected to receive from the federal government would fall by 4% in all areas, according to William Hoagland, senior vice president at the Center for Bipartisan Policy.

That cut would be made each year for five years, the CBO said.

“Over time, more and more doctors can say, ‘I’m not willing to operate under Medicare restrictions and reimbursements,'” said Anderson.

Affected providers may somehow increase their costs to compensate, he said.

Ironically, consumers would likely see cheaper premiums, said Marc Goldwein, senior vice president and senior policy director for the Responsible Federal Budget Committee.

That’s because the premiums are calculated based on the cost, which would have fallen, Goldwein said.

A 4% cut, if it occurs, is small enough that many providers will not leave the Medicare network, he added.

The precise impact of PAYGO rules on student loan rates is also not entirely clear.

But there are examples of how this can work. For example, PAYGO rules generated an automatic 5.7% increase in loan rates this year, according to the Office of Management and Budget.

This helped offset $ 1.2 trillion in spending on the 2012 American Taxpayer Relief Act. The rate increase corresponded to an overall 5.7% reduction in mandatory programs without defense.

Students may also find it more difficult to obtain loans if certain Department of Education programs receive less funding, Anderson said.

“There would be much less money to provide loan guarantees,” he said. “Thus, an entire stack of students would not be able to obtain loans.”

The Department of Education did not return a request for comment.