Debt ceiling deal hits health programs, but could have been worse

Policy analysts, Democrats and Republicans disenchanted with the deal agree: Federal health programs have dodged a budgetary bullet in Washington’s showdown on raising the nation’s debt ceiling.

A compromise bill approved by the Senate late Thursday includes some trims and caps on health spending for the next two years.

But the deal protects health programs like Medicaid from deep cuts approved in April by the Republican-led House. The bill suspends the debt ceiling – the federal government’s borrowing limit – until January 1, 2025, after the next presidential election.

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The need for Congress to act to avoid an unprecedented debt default and its swift economic consequences gave House Republicans the advantage of extracting spending concessions from Democrats. But the compromise bill in the end, negotiated primarily by House Speaker Kevin McCarthy and Biden administration officials, limits health spending only slightly.

Most conservative Republicans said they resented seeing Democrats as cheap. “It’s a bad deal,” Rep. Chip Roy (R-Texas), one of the most vocal opponents of the bill, said during a news conference at the Capitol. “Nobody sent us here to borrow an additional $4 trillion for absolutely nothing in return.”

Besides spending limits, the main health-related concession made by Democrats is the roughly $27 billion in money appropriated for Covid-related programs but not yet spent.

Only a fraction of the funding from Covid programs is specifically health-related; For example, money from programs focused on housing and transportation is also being returned to the federal government.

Of the unspent COVID funds, the nearly $10 billion from the Public Health and Social Services Emergency Fund is the largest single rescue, according to the Congressional Budget Office. CDC must pay back $1.5 billion. But exempt from those health-related gifts are “priority” efforts such as funding research into next-generation Covid vaccines; long term covid research; and efforts to improve the pharmaceutical supply chain.

“The deal has minimal impact on the health sector,” concluded Capital Alpha Partners, a Washington-based policy strategy firm.

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That would not have been the case with House Republicans’ “Limit, Save, Grow Act,” their first proposal to raise the debt limit and slow — in some areas dramatically — federal spending growth. That bill would have reduced the federal deficit by nearly $5 trillion over the next decade, including cutting more than $3 trillion in domestic discretionary programs, which accounts for about 15 percent of federal spending. A portion of that 15 percent goes to health programs, including the National Institutes of Health, the Centers for Disease Control and Prevention, and the FDA.

The Republican bill would also have imposed nationwide work requirements on the Medicaid health program, a proposal strongly opposed by Democrats in Congress and the Biden administration.

Democrats argued that such requirements would not increase work, but would instead strip eligible people of their health insurance for failing to complete the required paperwork. This is already happening, according to an analysis by KFF Health News, as states begin trimming rolls following the end of the COVID public health emergency.

The compromise bill, however, leaves the key federal health programs, Medicare and Medicaid, untouched — amounting to a political victory for Democrats, who prioritized protecting entitlement programs. The deal does not include any new work requirements for Medicaid.

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The bill also freezes other health spending at its current level for the coming fiscal year and allows for a 1% increase the following year. It will then be up to the House and Senate appropriations committees to determine how to distribute the money among the discretionary programs whose spending levels they oversee.

Advocacy groups have argued that a funding freeze also harms programs that provide essential services to millions of Americans. Sharon Parrott, chair of the liberal Center on Outcomes, Budget and Policy Priorities, said “major national priorities will be cut overall, taking into account the real impact on inflation.”

Even less happy, however, are conservatives, who had hoped that the debt ceiling fight would give them a chance to take a sizable chunk out of federal spending.

“Overall, this agreement will continue America’s trajectory toward economic destruction and expanded federal control,” Kevin Roberts, president of the Conservative Heritage Foundation, said in a statement.

KFF Health News is a national health policy news service. This is Henry J. is an editorially independent program of the Kaiser Family Foundation that is not affiliated with Kaiser Permanente.

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