AGA Washington Insider

A policy blog for GIs

As Sequestration Sinks In, Old Budget Battles Resume

capitol bldg down PA AveOn March 1, President Obama signed an order officially implementing the sequester, which cut $85.3 billion from government agencies, half of which was taken from defense programs ($42.7 billion). The other half of the sequestered amount comes from non-defense programs — $16.9 billion from mandatory programs, like Medicare, and $25.8 billion from discretionary programs, like NIH.

Immediate Effects

Cuts to Medicare are limited to 2 percent and will only impact providers, not beneficiaries. Recently, CMS sent a communication to providers and suppliers informing them that the implementation of the 2 percent cut will occur for all services beginning on or after April 1, 2013. So, all physicians who serve Medicare patients should expect a 2 percent reduction in payments beginning April 1. NIH will see a 5 percent cut, and AGA is carefully monitoring how the agency will implement it. Certainly, the cut will impact the number of grants that NIH is able to fund especially given that its budget has not kept pace with biomedical research inflation.

Despite both parties’ initial opposition to sequestration, there has been no effort to rescind these cuts. Now, it is unlikely to happen unless Congress and the president are able to reach the illusive “grand bargain” on deficit reduction, which they have been unable to for the past few years.

So, What’s Next?

First, Congress needs to pass a continuing resolution (CR) to keep the government running through the end of the fiscal year on Sept. 30, 2013. The most recent CR funds the government until March 27, and last week the House passed H.R. 933, which contains two appropriations bills — Defense and Military Construction-Veterans Affairs — along with the remaining unfinished appropriations bills that would fund the government through the end of the fiscal year. The Senate Appropriations Chair Barbara Mikulski, D-MD, and Ranking Member Richard Shelby, R-AL, have crafted their version of a CR, which includes a $71 million increase to NIH, but leaves the sequestration cuts in place. Sen. Tom Harkin, D-IA, may also offer an amendment to the CR that would add $211 million to the NIH budget, but does not address the underlying sequestration cuts.  The Senate is scheduled to vote on their version this week and hope to have any differences reconciled before they leave town for the spring break on March 22.

This week, House Budget Committee Chair Paul Ryan, R-WI, also released his blueprint for the Republican budget resolution, outlining spending priorities over the next decade. Included in Chairman Ryan’s plan are cuts to Medicare and Medicaid, additional cuts to discretionary spending on top of those mandated by the Budget Control Act, lowering the corporate tax rate to 25 percent, reforming Medicare to a premium support plan, and eliminating the Affordable Care Act. Many of these policies were included in the Republican Presidential platform last fall and it is safe to say that this proposal will be rejected by the Democratically-controlled Senate. The House is expected to vote on Chairman Ryan’s proposal next week.

The Senate Budget Committee Chair, Sen. Patty Murray, D-WA, is also working on a budget resolution that will undoubtedly be different from the House blueprint. By law, both the House and Senate are required to pass a budget resolution by April 15, even though the Senate has not passed one since 2009. This year, however, a bill was passed in February withholding Senators’ and Representatives’ pay unless they pass a budget by the deadline, which may provide a little added incentive. The budget resolutions serve as a blueprint to the appropriations committees as to what they can spend as they craft their spending bills.

Assuming Congress is able to reach an agreement on the current CR, the next budget battle will be over the fiscal year 2014 budget resolutions and the ensuing appropriations process, perhaps sometime late spring.

AGA will continue to monitor this latest budget process and to advocate that the budgets include appropriate funding for NIH and biomedical research, as well as meaningful payment reform for physicians under Medicare. We are monitoring the implementation of sequestration and its impact on providers. Look for more updates in AGA eDigest and the AGA Washington Insider.

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