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Rebecca Farley

Director, Policy & Advocacy, National Council for Behavioral Health

Medicaid, Healthcare Cuts at Risk in Upcoming Budget Talks

October 24, 2013 | Federal Budget | Comments
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The ink is barely dry on Congress’ deal to end the government shutdown, but another budget crisis is already brewing. While last week’s deal temporarily averted a national financial crisis, it did not resolve the major ideological differences that have plagued fiscal negotiations for years. Now, lawmakers are working to meet yet another budget deadline – and big proposed cuts to healthcare spending are once again on the table.

Continue reading for an analysis of what’s at stake and how these negotiations will affect behavioral healthcare spending.

What is this new budget deadline?

Last week’s agreement required House and Senate negotiators to strike a deal on overall 2014 spending levels by December 13. This top-line number (known as the “budget resolution”) sets the framework for negotiations over the twelve annual appropriations bills. Once they agree to a new budget resolution, lawmakers have until January 15 to pass the 2014 budget before government funding runs out again. January 15 is also the date that the next round of sequester cuts are automatically scheduled to take place. Close on the heels of this date is the next deadline for the national debt ceiling, which Congress extended to February 7 and which must be raised once again if the U.S. is not to default on its financial obligations.

Why do we need a budget resolution?

It is usually easier for the twelve appropriations subcommittees to complete their work when a budget resolution is in effect.

Will Congress be able to strike a compromise on the 2014 budget resolution?

The House and Senate passed sharply divergent budget resolutions this year, reflecting their major disagreements over the direction of federal spending. President Obama proposed a $1.2 trillion budget in February of this year. The Senate Budget Committee then approved a budget resolution that repeals the 2013 sequestration cuts and sets spending at $1.058 trillion, while the House budget preserves sequestration and rings in at $967 billion. The temporary budget resolution passed last week to end the shutdown sets spending at $986 billion – higher than the House’s preferred level but much lower than the figure Senate Democrats hoped to see.

budget resolution

(Source: Wonkblog)

How do the House and Senate approach Health and Human Services (HHS) spending?

Not surprisingly, one of the biggest disagreements between House Republicans and Senate Democrats is over spending levels for the Labor-HHS-Education spending bill. The House has approved $121.8 billion, which is $43 billion less than the Senate’s allocation of $164.3 billion. Much of this difference is accounted for by Affordable Care Act spending, which Republicans have sought to eliminate or curtail. It also reflects major differences in spending for healthcare agencies such as the Substance Abuse and Mental Health Services Administration, which funds many critical programs for individuals with behavioral health conditions. Click here to read the National Council’s fact sheet on the 2014 budget and our requests for lawmakers.

What will happen to Medicaid, Medicare, and Social Security?

Both sides have indicated that cuts to entitlement spending will be on the table in future negotiations, both on the 2014 budget and future increases to the national debt ceiling. Top Republicans have said they plan to push for “substantial reforms” on entitlement spending, while Democrats indicated they will pursue revenue increases in exchange for any entitlement reforms. Past fiscal negotiations have included proposals such as converting Medicaid to a block grant and other policies that could have a disastrous impact on individuals living with mental illness and addiction disorders.

How do the sequester and the debt ceiling enter the picture?

The second round of sequester cuts, totaling $20 billion, are slated to take effect January 15, the same day that current government funding expires. These cuts will fall predominantly on defense programs, but any type of federal spending could be at risk as lawmakers search for a compromise that will both keep the government open and address the recurrent debt ceiling problem. Most congressional leaders have expressed their desire to avoid a repeat of this month’s shutdown and near-default, making the sequester and the January 15 deadline key points of leverage in negotiations.

What do these negotiations mean for 2014 and beyond?

Masked behind political rhetoric over defunding the Affordable Care Act, these budget cuts tell the true story of the government shutdown and illustrate fiscal conservatives’ progress in winning steep cuts to federal spending. Organizations that rely on federal discretionary spending for their operations will continue to feel the crunch for years to come.

Will the two sides reach a deal on any of these fiscal issues?

It is unclear. Republicans and Democrats remain far apart on a number of important policy issues, including healthcare and entitlement spending, defense spending, revising the tax code, and deficit reduction. The chart below outlines these ideological rifts (click to expand).

budget differences 2014 chart

These major differences cast doubt on whether the newly formed conference committee will repeat the experience of 2011’s failed “Supercommittee,” which set sequestration in motion when it could not agree on a long-term plan to reduce federal spending.

What can I do?

The National Council is closely monitoring the newest round of budget cuts and will keep you updated on opportunities to take action. Stay tuned to Capitol Connector to see our upcoming action alerts and other opportunities for advocacy!

(Photo credit: AP via Politico)