How does the budget deal affect the Affordable Care Act?

Joanne Kenen

About Joanne Kenen

Joanne Kenen, (@JoanneKenen) the health editor at Politico, is AHCJ’s topic leader on health reform and curates related material at healthjournalism.org. She welcomes questions and suggestions on health reform resources and tip sheets at joanne@healthjournalism.org. Follow her on Facebook.

So how does this mammoth budget-cutting deal, with its congressional “supercommittee” affect health reform?

Good question, because lots of people in Washington are asking it too.

More specific answers will become clearer in the next few weeks, but here’s a first version of the road map to both the policy and the politics.

What questions do you have about health reform and how to cover it?

Joanne KenenJoanne Kenen is AHCJ’s health reform topic leader. She is writing blog posts, tip sheets, articles and gathering resources to help our members cover the complex implementation of health reform. If you have questions or suggestions for future resources on the topic, please send them to joanne@healthjournalism.org.

First, understand there are two different processes – and each, separately, aims at cutting more than $1 trillion over the next decade.

The one that you’ve probably heard most about is the “supercommittee” of 12 members of Congress. They are supposed to identify savings by Thanksgiving. Entitlements – Medicare, Medicaid, Social Security and aspects of the Affordable Care Act – are part of their turf. So are taxes and revenue – at least in theory. It’s not so clear that the Republicans see it that way given the public statements of Congressional leaders.

If they agree on some kind of grand deal by Thanksgiving, Congress has to take it or leave it by the end of December, eliminating the usual congressional dilly-dallying. (It looks like dilly-dallying to the casual observer or much of the public, but remember that all that arcane, tedious process IS policy in Congress. If you slow something down, make it go through hoops, amend it, hold it up, etc., it doesn’t become law. That may be good or, depending on your point of view, bad politics.)

If Congress takes any recommendations that the supercommittee agrees on, that’s the law. If the committee fails, or Congress rejects it, then the “trigger” gets pulled. The official name is “sequestration.” That’s a fancy name for automatic cuts – 2 percent across-the-board cuts in Medicare, for instance, affecting all health care providers, doctors, hospitals, etc. It won’t affect beneficiaries – at least not directly.

MEDICAID is not subject to the trigger. Neither, according to the preliminary interpretations I’ve received from analysts and congressional staff, are the big, key subsidies in the health care reform law – the Medicaid expansion and the subsidies that will help low-income and middle-income people afford health care in the new state exchanges.

Other parts of the health reform law are, however, subject to automatic cuts. Among them: Cost-sharing subsidies for low-income people. This isn’t the help paying the premium; this is the help with the co-pays when people do get care. But the payments are made to health plans, not directly to beneficiaries so it won’t have the direct impact of discouraging care. It may affect how health plans make decisions about what markets to participate in. Gary Claxton and Larry Levitt at Kaiser Family Foundation explain here.

Also, the supercommittee could have a partial deal – meaning there’s still a trigger, but a smaller one. Maybe they won’t reach agreement on $1.2 trillion to $1.5 trillion in savings, which would avoid the trigger. But maybe they could agree on, say, $500 billion. That means a trigger wouldn’t have to go as deep because some of the savings would already be identified.

To recap – before we go on to the second stage of this process: The “super-committee” can do whatever it wants to health care, Medicare, Medicaid, Social Security, etc. – if it can agree, if it can get the rest of Congress to agree and if the president doesn’t veto it. Will the Democratic Senate and the Obama White House agree to cuts that eviscerate health reform? Not likely. In fact, the Democrats “won” on very few aspects of the budget/debt deal. Walling off Medicaid and key parts of the health coverage expansion were two of the “wins.” That’s a bright line worth paying attention to as this moves forward.

Does that mean other health-reform related spending will be untouched? Given how many moving parts there are to any spending deal, and the fact that defense and tax policy are also part of the mix, chances are it will be affected. But expect to see that bright line remain visible – maybe not quite as bright, but visible. (The CLASS Act, the voluntary long-term care program created under health reform, is a different story; it’s quite vulnerable.)

The second part is the annual appropriations process. The budget deal provides for cuts – real cuts in spending, not just slowing the rate of growth. Health programs (aspects of the health reform legislation touching on exchange creation, prevention, community clinics, etc., and just about everything else at the Department of Health and Human Services –  the FDA, NIH, CDC,  etc. – will be subject to these cuts. But this isn’t an across the board process, it’s a line-by-line, or at least category/agency-by-category/agency, process. And there is some horse trading.

It’s safe to say that the Republicans will try to cut discretionary portions of the new health law. That’s not a new political dynamic, it doesn’t arise out of the debt ceiling or the Wall Street woes. It’s what we’ve seen since last fall’s elections and the repeal/defund fights of the past few months. And House Budget Chairman Paul Ryan has publicly tried to insert health care into any potential deal. So expect to see more Republican push to cut, and continued Democratic push back. Will health spending emerge unscathed? It’s too soon to know but, given the amount of savings Congress needs to find –both in this budget deal and in the perennial quest to fund the “doc fix” payments – some cuts are clearly possible. Some of it may affect aspects of exchange establishment, regulation, prevention, public health, etc. But it’s hard to see the Democrats allowing cuts so deep that they basically constitute a side door to repeal.

One further twist – some Republicans are calling for a delay in health reform implementation to save money.”Delay” may sound better to an ambivalent public worried about spending than “repeal.” What’s delayed (if anything), how it’s delayed, how long it’s delayed, and what stopgaps are created in the meantime could have an impact on how many people get covered in 2014.

Assorted committees and government agencies are still examining the new budget law and how it will affect … everything. So the perspective I’ve outlined here – and I’m writing amid all the market turbulence – may change as the economic and political climates change. But the lines in the sand around the trigger – health reform, Medicaid and Social Security – tell us something about where the White House will come down.

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