Congress Plans Monday Vote on Framework To Avoid Federal Default

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President Obama and congressional leaders on Sunday night announced that they had reached an agreement on a fiscal year 2012 budget framework that would cut the federal deficit by trillions of dollars over the next decade and raise the federal debt ceiling, the New York Times reports (Hulse/Cooper, New York Times, 7/31).

For weeks, White House officials and the leaders had been trying to finalize a budget and deficit-reduction deal that would increase the government's current borrowing cap of $14.3 trillion by Aug. 2 to avoid a federal default on debt obligations. However, the talks were held up by partisan disagreements over entitlement cuts and tax increases. GOP lawmakers want broad spending cuts and entitlement reforms, while Democrats have sought new tax increases to generate revenue (California Healthline, 7/22).

Sunday's announcement of the agreement came after more than two days of negotiations and a series of failed symbolic votes in the Senate and House on competing Democratic and Republican proposals (Schatz, CQ Today, 7/31). Congressional leaders immediately began contacting their caucuses with details of the framework agreement, which they are scheduled to present and discuss during separate caucus meetings Monday morning, The Hill's "Floor Action Blog" reports (Bolton, "Floor Action Blog," The Hill, 7/31).

Details of New Compromise Budget and Debt-Limit Package

Under the new framework agreement, federal discretionary spending would be cut by a total of about $2.4 trillion over the next decade, while the debt ceiling would be raised in two stages (New York Times, 7/31). The plan would:

Enact an immediate debt-limit increase of $900 billion, followed by an increase of between $1.2 trillion and $1.5 trillion at a later time, at the president's request, according to CQ Today (Cranford, CQ Today, 7/31);

Require a new 12-member bipartisan congressional panel to develop another deficit-reduction package with $1.5 trillion in cuts, which Congress would have to approve by late December of this year; and

Trigger $1.2 trillion in automatic spending cuts, which would be evenly distributed between defense and non-defense purposes.

The automatic spending cuts would apply to Medicare, but not Medicaid, other entitlement programs or civil or military spending, according to a summary issued by House Speaker John Boehner (R-Ohio), The Hill reports. A White House fact sheet indicated that the cuts to Medicare would be limited to 2% of the program's cost (Bolton, The Hill, 7/31).

Up Next for Deal

According to CQ Today, the Senate on Monday is likely to vote on the plan before the House, where the biggest test might be securing enough votes to ensure its passage. Boehner during a conference call with his caucus members on Sunday noted that they would have less time than usual to review the plan, but he added that "it's pretty much the framework we've been operating in" (Schatz, CQ Today, 7/31). Meanwhile, the Times reports that House Minority Leader Nancy Pelosi (D-Calif.) took a noncommittal approach to the plan and suggested that not all House Democrats would rally behind it (New York Times, 7/31).

Federal Health Programs Poised for Deep Cuts Under Deal

Medicare and Medicaid could experience large-scale cuts under the budget and deficit deal, CQ Today reports. Although Obama in his televised remarks on the deal said that only "modest adjustments in programs like Medicare" will be made, such decisions will be up to the 12-member bipartisan congressional panel created by the deal. According to CQ Today, the deal does not preclude the panel from cutting Medicare, Medicaid or federal health reform law programs by hundreds of billions of dollars over the next 10 years.

The White House fact sheet indicates that any cuts to Medicare "would be capped and limited to the provider side," but CQ Today notes that provider cuts could compromise access to care. Independent analysts have not yet examined the effect of potential cuts to government health programs in the debt deal.

Large-scale cuts to government health programs could jeopardize support for the deal among liberal lawmakers. CQ Today reports that Rep. Raul Grijalva (D-Ariz.) "dismissed" the deal on Sunday. He said, "Progressives have been organizing for months to oppose any scheme that cuts Medicare, Medicaid or Social Security, and it now seems clear that even these bedrock pillars of the American success story are on the chopping block" (Reichard/Bunis, CQ Today, 7/31).

States Brace for Potentially Deep Cuts to Federal Medicaid Funding

The specter of federal cuts has raised concern among state governors, lawmakers and state agency officials about the effect on their Medicaid programs and already troubled state budgets, the AP/Minneapolis Star Tribune reports. According to the National Conference of State Legislatures, states already have been forced to make substantial cuts to close nearly $480 billion in budget gaps since the beginning of the economic downturn.

In California, Senate President Pro Tempore Darrell Steinberg (D-Sacramento) said the state already has narrowed a $26.6 billion budget shortfall in part through increased tax revenue, but he expressed concern that Medi-Cal, the state's Medicaid program, could be a target for additional cuts if the federal government reduces payments to the states for the program.

Nevada state Sen. Sheila Leslie (D), who recently discussed the issue of federal Medicaid funding with the Obama administration, said, "We have the potential for disaster should there be a major realignment in federal funding that results in a cost shift to states," adding, "In short, we are teetering on the edge right now, and a cost shift could send us over the cliff" (Haigh/Ramde, AP/Minneapolis Star Tribune, 7/31).

Federal Default Could Affect Health Care Providers' Pay, Solvency

Should Congress fail to enact a budget and debt-limit agreement and avert a federal default on debt obligations on Aug. 2, its temporary effect on health care providers and state health programs could be limited to a hold on government payments for Medicare and Medicaid, Kaiser Health News reports.

However, if the standoff continued for several more weeks, providers might be unable to pay their staff and their long-term solvency could be compromised, according to health care experts and former government officials (Rau et al., Kaiser Health News, 7/29).


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