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How the debt-limit deal affects Medicare
Medicare Rights Center
After months of negotiations, lawmakers reached a compromise this week to increase the United States’ debt limit and avoid default. The Budget Control Act of 2011, signed into law on Tuesday by President Obama, increases the debt limit, in increments, by at least $2.1 trillion, in exchange for at least that amount in deficit reduction over the next 10 years.
The compromise immediately enacts 10-year discretionary spending caps generating nearly $1 trillion in deficit reduction, which affect both defense and non-defense programs, and increases the debt limit by $900 billion. Discretionary programs do not include programs such as Medicare, Medicaid and Social Security. But spending caps could affect programs that help people with Medicare, including programs created by the Older Americans Act. Other examples of discretionary spending include funding for the EPA, national parks and medical research.
In order to increase the debt limit a second time to avoid default, Congress must enact further deficit reduction of $1.2 to $1.5 trillion. To facilitate this, the compromise creates a bipartisan committee charged with finding the additional deficit reduction.
The bipartisan committee may use all avenues to achieve this, and as a result could recommend changes to Medicare, Medicaid and Social Security.
In the case of Medicare, the most problematic recommendations would be those that save the federal government money by shifting costs to people with Medicare or by limiting access to care. Such policies include increasing the Medicare eligibility age, increasing Medicare premiums and other cost-sharing, and redesigning the Medicare benefit, including by limiting coverage provided by Medicare supplemental insurance.
In order to encourage both parties to come to a compromise through the committee process, the law triggers $1.2 trillion in across-the-board cuts if the committee fails to come to an agreement or Congress rejects the agreement.
The trigger, sometimes called a sequester, exempts Medicaid, Social Security and certain other low-income programs. In addition, Medicare is for the most part excluded from automatic cuts, though Medicare provider payments could be decreased by up to 2 percent if the trigger were to take effect.
