Covid relief bill could lead to cuts to health insurance and student loan programs

A Democrat-backed Covid relief bill could result in billions of dollars in cuts to medicare and other federal programs, like those that support the unemployed and student borrowers, if ultimately passed .

The funding cuts would take effect in 2022 and last for several years.

Republicans are using the specter of setbacks to argue against granting additional pandemic aid, which includes $ 1,400 stimulus checks and more unemployment benefits.

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It is not clear that lawmakers would allow them to happen. Even if they survive, the exact impact of the cuts on consumers is uncertain.

The reductions can automatically increase fees on federal student loans, for example, according to the Office of Management and Budget.

Some doctors and hospitals may choose not to accept Medicare due to declining federal reimbursements, budget experts say. Suppliers may also try to pass the additional costs on to consumers.

The cuts are due to a rule – the PAYGO Act – that corrects additions to the federal deficit by automatically withdrawing funding from certain departments and programs.

The pandemic aid measure would increase the federal deficit by $ 1.9 trillion over a decade, according to a Congressional Budget Office memo released Thursday by Director Phillip Swagel.

As a result, Medicare funding would be cut by 4%, or $ 36 billion, starting next year, Swagel said. His estimates were in response to a question from Minority House Leader Kevin McCarthy, R-Calif.

Another reduction of $ 345 billion would come from a series of other areas set aside as “mandatory” federal spending. (This means they don’t involve annual congressional appropriations.)

At stake is funding for things like student aid, housing programs, tax collection, investor protection, and state unemployment operations. Discounts are typically a few million dollars or less for each line item.

Programs like Social Security, Medicaid, and Food Stamps are exempt from cuts.

Rep. Jason Smith, a leading member of the House Budget Committee, suggested that Medicare cuts would hurt consumers.

“This bill will directly harm the American working class,” Smith, a Republican from Missouri, said Monday at a committee hearing on the legislation.

Democrats, including President Joe Biden, believe the federal government should send more aid to Americans immediately to support a sluggish economy and lingering financial hardship for households.

Experts are skeptical that lawmakers would ultimately let the budget measures take effect.

For one thing, they usually don’t. Congress reversed the automatic cuts that would have been triggered by former President Donald Trump’s tax cut in 2017, for example. It also did so last year to reverse the deficit effect of previous pandemic aid measures.

To renounce them this year would require Republican support. It is likely that the GOP will choose to do so, the experts said. Otherwise, they would also choose to cut funding for things like farm subsidies, defense, and customs and border protection.

In addition, the Covid relief deficit would essentially wipe out all funding for the aforementioned programs, CBO said. (Medicare is an exception – its reductions are capped at 4% while other programs have no limit.)

“It won’t happen,” said Barry Anderson, an independent consultant who was previously a senior official in the Congressional Budget Office and the Office of Management and Budget. “They will give it up.”

The Pay-As-You-Go Statutory Law of 2010 – also known as PAYGO – is the mechanism intended to protect against bulking deficits.

Deficits are recognized at the end of the year and calculated on average over a period of five or ten years. These averages are offset by automatic withdrawals in other areas each year, in an effort to reduce the impact of a deficit bill to $ 0.

In the case of Medicare, the reimbursement rates that hospitals, doctors and other providers expected to receive from the federal government would drop by 4% across the board, according to William Hoagland, senior vice president of the Bipartisan Policy Center.

This reduction would be in place each year for five years, CBO said.

“Over time, more and more physicians may say, ‘I am unwilling to operate under the constraints and on Medicare reimbursements,” Anderson said.

Affected suppliers may somehow increase their compensation costs, he said.

Ironically, consumers would likely see cheaper premiums, said Marc Goldwein, senior vice president and senior policy director of the Committee for a Responsible Federal Budget.

This is because the premiums are calculated based on the cost, which would have gone down, Goldwein said.

A 4% reduction, if it occurs, is small enough that many providers are unlikely to leave the Medicare network, he added.

The precise impact of the PAYGO rules on student loan fees is also not entirely clear.

But there are examples of how it might work. For example, the PAYGO rules triggered an automatic 5.7% increase in loan fees this year, according to the Office of Management and Budget.

This helped offset $ 1.2 trillion in expenses under the American Taxpayer Relief Act of 2012. The fee increase corresponds to an overall 5.7% reduction in mandatory non-binding programs.

Students may also find it more difficult to obtain loans if certain Department of Education programs receive less funding, Anderson said.

“There would be a lot less money to provide loan guarantees,” he said. “So a whole pile of students couldn’t get loans.”

The Education Department did not return a request for comment.