By Kaitlin McColgan
As Alex Sange reported previously, the Joint Select Committee on Deficit Reduction (better known as the Super Committee) has now officially failed to reach agreement on a proposal of any size to reduce the deficit. As we reported, under the Budget Control Act (BCA), the law that established the Super Committee, this will prompt a process known as sequestration- more on that later. This does not mean, however, that deficit reduction efforts in DC are over or that sequestration as outlined in the law is a done deal. While much can change in the months ahead, here are some key factors that health center advocates should be aware of in light of the Super Committee’s failure.
Proposals Raised in the Super Committee Are Not Going Away
You might call it gone but not forgotten. Even though the Super Committee failed to reach agreement on a final plan, the draft proposals the two parties traded – and in particular cuts to programs that appeared on both sides’ lists, will continue to serve as a starting point whenever spending offsets (or “pay-for’s”) are needed for larger packages or as part of future deficit reduction efforts. In addition, if Congress looks to alter BCA’s sequestration (see below), proposals from the Super Committee are likely to be candidates for a replacement effort. This makes the fact that health centers were not targeted directly in any Super Committee proposals all the more important.
Sequestration is a Complicated Process, the Specific Impact of Which Has Not Been Officially Estimated To-Date
In general, the Budget Control Act now calls for a process known as “sequestration” in order to reach the $1.2 trillion in deficit reduction the Super Committee failed to come up with. Half of the savings ($600 million) are supposed to come from security spending and the other half from non-security spending. In theory this is achieved through an across the board cut to all programs in government occurring in January 2013. However, given the many excluded programs and limitations in the law, as well as the fact that in the non-security realm the cuts will need to be applied to both mandatory and discretionary spending, the process gets more complicated. Of note, Medicaid is completely exempted from the sequester.
NACHC has been working for months to ensure that any cut to health centers is minimized. It is our interpretation that the cuts to both Health Centers program discretionary and mandatory spending are limited to 2%. This is important given estimates that in general, non-security programs may be facing cuts in the realm of 9.3% or more. That said, it is impossible to know how the sequester will be applied to individual programs until the Office of Management and Budget (OMB) offers its official judgment, which we hope will occur sometime early in the New Year.
Some in Congress Are Already Challenging BCA’s Sequestration Process
And yet, all of these interpretations are based on the notion that the BCA’s sequester will be implemented. At this juncture, many Members of Congress have begun to raise questions about the impact of the sequester, such as what impact the defense cuts would have on national security. There is a possibility that before the cuts go into effect in January 2013, they will be altered in some way. If so, the $1.2 trillion figure would likely not be altered (indeed President Obama has indicated he would veto anything that undid that deficit reduction total), meaning new cuts will have to replace any blunting of BCA’s sequester. As part of a replacement effort, everything in government would likely be “back on the table,” though items that were in the Super Committee’s various proposals would likely be a starting place.
Discretionary Budget Caps Are Still in Place
Finally, it is also important to note that one major deficit reduction component of BCA is already in effect: hard caps on discretionary spending. These caps mean the law now requires Congress to meet certain annual spending targets. One immediate example of the impact of these limits is the current continuing resolution the government is operating under, which funds programs at 1.5% below FY2011 levels- a necessity in order to comply with BCA.
All in all, many DC observers expect the year ahead to be highly contentious as the two sides dig in during an election year. After the election, with the Bush tax cuts slated to expire and the sequester looming, there may be one more effort to strike the “grand bargain” on deficit reduction that has so far eluded Congress. Stay tuned in the months ahead as Health Centers on the Hill works to keep health center advocates up to speed on all the latest developments here in DC.