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BIAA Reviews Debt Ceiling Negotiations

20-Jul-2011 The Brain Injury Association of America is closely monitoring recent developments with regard to the debt ceiling since the debate is very important for the future of Medicare and Medicaid.  

After weeks of deadlock, yesterday a group of Senators known as the “Gang of Six” released a bipartisan plan to raise the debt ceiling coupled with a spending cut of $3.7 trillion from the U.S. debt over a ten-year period. The group has been working on a plan since the President’s Fiscal Commission released its long-term budget recommendations last year.

The Gang of Six plan, which was received with moderate enthusiasm by President Obama and on both sides of the aisle in the Senate, has breathed new hope into negotiations to raise the debt ceiling before the August 2nd deadline, at which point the nation faces default if Congress fails to act.  Despite this progress, some Democratic leaders in Congress question whether the Gang of Six agreement will be ready for a vote by August 2nd.

The reception in the House has been more tepid, however, where the Republican majority will vote on its own plan, calling for a balanced budget amendment, steeper spending cuts, and budget process reforms in exchange for raising the debt ceiling. Known as the “Cut, Cap and Balance” bill, the legislation would cut mandatory spending by $35 billion in 2012 and $76 billion in 2013, exempting Medicare and Social Security but not Medicaid.  In future years, spending would be limited to decreasing percentages of the GDP. The measure is not expected to pass the Senate and the President has already threatened to veto the legislation if it arrives on his desk, an unlikely prospect given the makeup of the Senate.

Leading up to the release of the Gang of Six’s plan, President Obama called for a “grand bargain” deal to cut the federal debt by $4 trillion over ten years, and said that entitlement and tax reforms should be part of the deal.  Of all current proposals under consideration, the Gang of Six’s plan is most in line with that vision.

According to the Gang of Six’s executive summary the plan uses a two-step legislative process that calls for: (1) an initial bill that immediately cuts $500 billion from the U.S. budget; and (2) committees of jurisdiction to report legislation within six months that would specify savings in entitlement programs over 10 years, with specific parameters such as:
•    Repeal of the CLASS Act, the long term insurance program authorized under the Affordable Care Act;
•    Reform or replacement of the Medicare Sustainable Growth Rate formula (at a cost of $298 billion) and fully offsetting the costs with health savings;
•    “Find” an additional $202 billion/$85 billion in health savings while maintaining “the essential health care services that the poor and elderly rely upon;” and
•    Review of total federal health care spending starting in 2020 with a target of holding growth to GDP plus one percent per beneficiary, with an enforcement mechanism.
    
It is unclear if Congress and the President will reach a deal on lifting the debt ceiling by August 2nd, or whether this plan will be the basic outline of that deal. However, it remains quite likely that any deal will include cuts to and/or reforms of entitlement programs – in the short term or the long term – and that stakeholders should remain vigilant for the next several days, weeks, and months on efforts to protect Medicare and Medicaid.

If you have questions, please contact Sarah D’Orsie, director of Government Affairs, at sdorsie@biausa.org or 703-761-0750 ext. 637.

 
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