GOP Tax Plan Would Cut Medicare Pay to Providers by $25B in 2018

November 14, 2017

Physicians, hospitals, and other providers would see their Medicare payments shrink by $25 billion next year if Congress approves a House Republican tax bill that would add roughly $1.5 trillion to the federal deficit over 10 years, the Congressional Budget Office (CBO) said today.

Lower reimbursement would materialize because the increase in the deficit would trigger automatic "sequestration" cuts for a variety of federal programs, including Medicare, under the Statutory Pay-As-You-Go (PAYGO) Act of 2010. That law essentially forces the government to erase its red ink.

The House measure, called the Tax Cuts and Jobs Act, would add a prorated $150 billion to the deficit each year for 10 years, beginning in 2018. If Congress doesn't pass other legislation to offset the deficit increase, or otherwise somehow bypass PAYGO requirements, the CBO said, the White House Office of Management and Budget (OMB) would have to order $136 billion worth of sequestration cuts next year. There's already a PAYGO credit of $14 billion on the books for 2018, which would bring the total offset to the necessary $150 billion.

PAYGO sequestration doesn't reduce guaranteed Medicare benefits to seniors, but it does reduce payments to providers, but by no more than 4%. In 2018, that percentage translates into a $25 billion cut, according to the CBO.

The remaining $111 billion in spending cuts needed to satisfy the PAYGO Act next year would have to come from other federal programs. But with so many programs, such as Social Security and Medicaid, being off limits to sequestration, the CBO said, the OMB would be able to tap the eligible programs for only $85 billion to $90 billion in mandatory reductions.

House Republicans have defended their plan to cut taxes by saying that it would stimulate the economy, which in turn would generate more tax revenue over the long haul to pay for itself. Democrats have warned that the Republican-controlled Congress will attempt to offset the $1.5 trillion addition to the deficit over 10 years by gutting Medicare and Medicaid.

A copy of the CBO report is available on the agency's website.

Follow Robert Lowes on Twitter @LowesRobert

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