OK. Sequestration has happened. That means funding cuts for community health centers, public health and medical research. Medicare provider payments will be shaved by two percent while Medicaid and CHIP are exempt. VA health benefits are also exempt, but the Indian Health Service is not. Though, like Medicare provider payments, cuts are limited to two percent.
Sequestration is not only bad health policy, it is also bad economic policy since it will shrink the economy and could push us back into a recession.
On the other hand, being against sequestration is not enough because bad as it is, it could be worse. Not only are many programs for low-income people protected, but cuts are balanced between military and domestic spending. We are actually better off if the alternative is a bad deal – e.g. cuts greatly exceed revenue, military spending is spared, social spending is hit hard, and health care cuts fall heavily on beneficiaries rather than on weeding out waste, inefficiency and low-value spending.
For the most part, we have yet to feel the effects of sequestration and won’t right away. Unlike a government shutdown, sequestration is more like a slow drip than a sudden convulsion. But the pain will be real. The questions for advocates is what do we have to do now? Can we roll back the cuts? Can we continue to protect Medicare and Medicaid benefits? To answer those questions, we need to understand how we got here and why.
The blame game
Of course, both sides blame the other. House and Senate Republican leaders have lambasted the President for not offering an alternative (even though he did, just not one they like), while for weeks leading up to the deadline, President Obama traveled the country and took to the airwaves trumpeting the ill effects of sequestration and calling on Congressional Republicans to replace the automatic cuts with a more balanced approach that includes new revenue.
Who is responsible for sequestration, and at this point does it matter? The answer is both Congressional Republicans and the President are responsible, and yes, it does matter.
Congressional Republicans are fundamentally responsible for sequestration.
The overwhelming preference of Republicans to resist taxes at all costs and demand cuts in Medicare, Medicaid, Social Security and other federal programs, (the opposite of the preferences of the American people by the way) is the core cause of sequestration. As long as “no new revenue” remains the Republican Party mantra, then sequestration will remain in force, for better and for worse. For worse because it means there is little chance of restoring cuts in the short run. For better because it also means there is little willingness to consider Medicare or Medicaid cuts within the Democratic caucus.
What about the Democrats?
Most of the blame lies with Congressional Republicans. However, President Obama also shares the blame—and not for the dopey reason that Bob Woodward says (Obama brought up the sequester idea first)—but because there are many things the administration did or didn’t do over the past several years that helped bring us to where we are today. The highlights include: embracing the politics of austerity even during a time of economic weakness; negotiating with Republicans over the debt ceiling; and, most recently, decoupling the debate about the expiring Bush tax cuts from sequestration decisions and the debt ceiling, thereby giving away most of his leverage.
As to why it matters, it’s important to remember the President remains committed to a “grand bargain” of spending reductions and tax increases. While most of the President’s policy proposals are progressive, some are decidedly not—including reductions in Medicare, Medicaid and Social Security benefits. Not only that, but some of his best policy proposals—reducing Medicare overpayments for prescription drugs—face tough sledding in Congress not only from Republicans, but also from Democrats.
The greatest danger for Medicare and Medicaid beneficiaries comes if Republicans ever soften in their opposition to new revenue. In that case, the President’s desire for a grand bargain coupled with the reluctance of many Democrats to confront the powerful interest groups who profit from waste and inefficiency in health care could lead to much deeper benefit cuts than the relatively modest, but still troubling changes currently backed by the White House.
The next round in the game of serial fiscal chicken is passage of a new Continuing Resolution, which must be in place by end of March or we will face government shut down. While there will certainly be some skirmishes, government shutdown seems pretty unlikely. At the same time, it is also very unlikely sequestration cuts generate enough heat to create deal that includes revenue. That means the status quo continues at least until the next fiscal face off when the debt limit has to be raised again this summer.
A three part agenda for advocates
As the deficit wars drag on through the summer, people who want to protect Medicare and Medicaid benefits have to keep up the pressure on Congress and the White House for a three-part agenda:
- First, new revenue must be part of any additional debt reduction strategy.
- Second, budget savings must not be tilted in favor of military spending and against domestic needs.
- Third, any savings that are obtained from federal health programs should come from reducing overpayments to drug companies, insurers and providers and improving public health, not from cutting benefits. (You can read about Community Catalyst’s recommendations for achieving health care related budget savings without hurting Medicare and Medicaid beneficiaries here.)
Recent initiatives, such as the letter sent by more than 100 members of Congress opposing any cuts in benefits are a good start and advocates should recognize these efforts by thanking their members of Congress. But it’s only a beginning. We’ve bungee-jumped off the fiscal cliff and it is a long climb back to the top.
– Michael Miller, Director of Strategic Policy