Trump and GOP’s tax bill would force cuts to Medicare, CBO says - The Washington Post


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Key Findings of the CBO Report

The Congressional Budget Office (CBO) reported that the Trump and GOP's proposed tax and immigration bill, adding $2.3 trillion to the deficit over 10 years, would trigger mandatory spending cuts, affecting Medicare significantly. This is due to a mechanism called 'sequestration,' which automatically implements budget reductions when the national debt surpasses certain levels.

Potential Medicare Cuts

The CBO projects that Medicare could face approximately $490 billion in cuts over 10 years, with an annual reduction capped at 4 percent. This could lead to significant consequences for senior citizens and people with disabilities.

Political Ramifications and Alternatives

The prospect of these cuts is politically sensitive. While Republicans initially opposed Medicare cuts, Congress could potentially override the sequestration process by ignoring the bill's debt impact, passing deficit-reduction legislation, or altering federal budget scoring rules.

Economic Impacts

Economists warn that even if the cuts are averted, other aspects of the bill might negatively affect Medicare funding. For instance, reducing taxes on tips and overtime could lower payroll taxes, a primary funding source for Medicare and Social Security.

Furthermore, the bill's proposed Medicaid cuts, leaving millions without health-care coverage, could further strain Medicare funding, particularly for those enrolled in both programs. This interconnectedness underscores the potential cascading effects of the proposed changes.

Expert Opinions

  • Health economists express concern over the potential impact of these cuts on hospitals, especially rural ones that heavily rely on Medicare funding.
  • Experts also anticipate potential cuts for doctors, hospitals, and insurance companies, as well as increased premiums for patients.
  • Some believe that Congress might bypass the mandatory cuts, as has been done in the past.
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President Donald Trump and congressional Republicans’ mammoth tax and immigration bill would add so much to the national debt that it could force nearly $500 billion in cuts to Medicare beginning in 2026, Congress’s nonpartisan bookkeeper reported late Tuesday.

Trump and the GOP’s budget reconciliation package — officially titled the One Big Beautiful Bill Act — would add $2.3 trillion to the deficit over 10 years, the Congressional Budget Office projected, forcing budget officials to mandate across-the-board spending cuts over that window that would hit the federal health insurance program for seniors and people with disabilities.

When legislation significantly adds to the national debt, which already exceeds $36.2 trillion, it triggers “sequestration,” or compulsory budgetary reductions. In that scenario, Medicare cuts would be capped at 4 percent annually, or $490 billion over 10 years, the CBO reported in response to a request from Rep. Brendan Boyle (Pennsylvania), the top Democrat on the Budget Committee.

“Having Medicare cuts suddenly enter the discussion has struck a lot of people by surprise,” said Timothy D. McBride, a health economist at Washington University in St. Louis. “Taking out 4 percent of the Medicare budget might not sound like much, but everything hurts at this point.”

Those reductions are not a foregone conclusion. Congress could instruct the White House budget office to disregard the reconciliation package’s debt impact, pass new legislation to reduce the deficit or change federal budget scorekeeping rules.

Allowing cuts to Medicare would probably come with dire political consequences. Trump on the campaign trail swore off reducing Medicare benefits, and Republicans have pointedly excluded cost-cutting from the program as part of their tax and immigration package.

Any cut in Medicare funding, economists say, would have a chilling effect on older Americans and people with disabilities at a time when a fast-aging population and rising health-care costs are already straining the system. Many hospitals, especially in rural areas, rely on Medicare for more than half of their funding, said McBride of Washington University.

“If you start taking whacks at these programs, these rural hospitals won’t survive,” he said.

It’s unclear exactly how these cuts — if they happen — might affect Americans and health-care providers, though economists say they would expect funding cuts for doctors, hospitals and insurance companies, and higher premiums for patients.

“A cut of this magnitude would be very, very large,” said Jonathan Gruber, chairman of the economics department at the Massachusetts Institute of Technology. But, he said, Medicare cuts remain unlikely: “What Republicans have done in the past is just waived the rules, and I presume they’ll do that again.”

Even if lawmakers find a way to sidestep the forced Medicare cuts, economists say there are ways other parts of the tax bill could spill into Americans’ Medicare benefits. Eliminating taxes on tips and overtime, for example, would probably result in lower payroll taxes — which are a key source of funding for Medicare as well as for Social Security.

Republicans are also proposing sweeping cuts to Medicaid that could leave nearly 9 million people without health-care coverage and more than 7 million without insurance over 10 years. Those cuts are likely to put added strain on Medicare funding, Roberts said, particularly for the 13 million Americans are who are enrolled in both programs and rely on Medicaid to cover Medicare premiums and co-pays.

“No matter what, the scale and breadth of the cuts in this bill will be felt in populations that policymakers have said they want to protect,” said Eric Roberts, a health economist at the University of Pennsylvania’s Perelman School of Medicine. “The size of the Medicaid and Medicare programs and the number of people they touch across the lifespan — children, working-age adults, pregnant individuals, older adults and people with disabilities — means that you can’t just go in and cut out a piece without cascading effects.”

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