Obamacare 101: Will the GOP tax bill force big Medicare cuts?


As congressional Republicans move forward with their tax legislation, there are growing concerns that the costs, which are projected to increase the deficit by $1.5 trillion over the next decade, will force a host of big cuts in government programs, including Medicare.

The Medicare cuts alone are projected to hit $25 billion next year, according to the nonpartisan Congressional Budget Office, and would increase steadily by 2026.

That would violate President Trump’s promise not to cut the healthcare entitlement program.


How would the cuts happen, and what would they mean for the more than 50 million elderly and disabled Americans who rely on Medicare for health coverage? Here are some answers.

Why are such cuts necessary?

For nearly three decades, Congress has operated under a set of arcane spending rules designed to control deficits.

These rules — known as pay as you go, or PAYGO — have been supported by Republicans and Democrats, and typically require legislation that increases the deficit to be offset by cuts to keep spending under control.

The GOP tax bills being considered in the House and Senate are projected to explode the deficit by $1.5 trillion over the next decade.

To comply with these spending rules, the federal government will be required to cut $1.5 trillion in spending over the next decade, or about $150 billion a year.

How would that work?

The responsibility for implementing the cuts falls to the Office of Management and Budget inside the White House.


But not everything can be cut.

For example, the PAYGO rules prohibit any cuts to Social Security payments to retirees. Also off the table are government programs that serve low-income Americans, such as Medicaid, the safety net insurance plan.

Other government programs, such as agricultural subsidies and student loans, would be on the chopping block, however.

So would Medicare.

What would Medicare cuts look like?

The federal government could only cut 4% of Medicare spending under PAYGO rules.

That would be spread across the many medical providers and insurers that Medicare pays. For example, hospitals and doctors that care for Medicare patients would likely see their fees cut.

Insurers that offer popular Medicare Advantage plans to millions of seniors would also see cuts.

Would that have any impact on Medicare patients?

That’s hard to say.

The federal government has periodically cut payments to providers and insurers that participate in Medicare to control spending.

These cuts often generate dire warnings from doctors, hospitals and others that seniors will lose access to vital medical services. To date, there has been little evidence that this has occurred in a widespread fashion.

But the 4% cuts would come on top of a 2% reduction in Medicare payments that was implemented four years ago under budget legislation approved by Congress in 2011.

For some doctors and hospitals that are heavily dependent on Medicare — especially in rural parts of the country where few patients have commercial health insurance — those cuts could be particularly painful.

That, in turn, could increase pressure on some facilities to close or limit how many Medicare patients they care for.

Couldn’t lawmakers just waive these rules?

The prospect of big Medicare cuts could be a problem for Republicans, who have paid a political price in the past for going after the entitlement.

But waiving the PAYGO rules — as Congress has done in the past — is no easy task.

The rules can only be waived with a 60-vote supermajority in the Senate, meaning Democrats and Republicans would have to agree because Republicans currently only have 52 votes.

The problem is that some Republicans may not want to waive the rules because they don’t object to such major cuts to government programs.

At the same time, Democrats feel GOP lawmakers are trying to ram through tax cuts that benefit wealthy taxpayers and corporations at the expense of middle- and lower-class Americans.

Many of them are unlikely to back a move — like waiving PAYGO rules — that would make passing such tax cuts easier.

Obamacare 101 is a periodic primer on the debate over repealing and replacing the Affordable Care Act »