AARP Chief Executive Officer Jo Ann Jenkins called on congressional leaders Thursday to keep their promise to America’s seniors and prevent a large cut to Medicare that the tax bill now being debated on Capitol Hill would trigger.
The tax measure would result in a $1.5 trillion increase in the federal deficit over the next decade, according to the nonpartisan Congressional Budget Office (CBO). Such a deficit would prompt an automatic $25 billion cut to Medicare as soon as January because of the “pay-as-you-go” law, commonly referred to as PAYGO.
The law was designed to keep the deficit in check by requiring the administration to reduce spending in many mandatory federal programs if Congress enacts a law that increases the deficit but doesn’t provide offsetting revenue.
In a letter to Senate Majority Leader Mitch McConnell, Minority Leader Charles Schumer, House Speaker Paul Ryan and Minority Leader Nancy Pelosi, Jenkins reminded McConnell and Ryan that they had recently issued a statement promising that “we will work to ensure these spending cuts are prevented.”
In their statement, the Republican leaders pointed out that the PAYGO law has never been enforced since it was passed in 2010 and “we have no reason to believe that Congress would not act again” to forestall the cuts PAYGO would require.
Medicaid, Social Security, food stamps and some other social safety net programs are exempt from the PAYGO law. But Medicare and programs like federal student loans, agricultural subsidies and the operations of U.S. Customs and Border Protection are not exempt.
The law caps how much the government can trim from Medicare at 4 percent. That’s $25 billion the first year, according to CBO. The amount could be higher in subsequent years, depending on the size of the deficit and Medicare’s budget.
The reduction would affect the payments that doctors, hospitals and other health care providers receive for treating Medicare patients. Individual benefits would not be directly cut, but the reduction could have implications for the care beneficiaries receive.
“The sudden cut to Medicare provider funding in 2018 would have an immediate and lasting impact, including fewer providers participating in Medicare and reduced access to care for Medicare beneficiaries,” Jenkins wrote. Health care providers might stop taking Medicare patients, she added, even as 10,000 older adults are enrolling in the health program each day.
In addition, Medicare Advantage plans and Part D prescription drug plans may compensate for the cuts by charging higher premiums or shifting more costs to beneficiaries in future years.
