Congressional debt deal exempts Medicare, Medicaid, and Social Security -- for now

August 1, 2011

While Medicare and Medicaid were exempted from budget cuts in the initial debt agreement reached by the U.S. House and Senate this week, they could be up for cuts later this year.

While Medicare and Medicaid were exempted from budget cuts in the initial debt agreement reached by the U.S. House and Senate this week, they could be up for cuts later this year.

The debt deal that Congress agreed to calls for spending cuts of around $1 trillion over 10 years. The initial agreement exempts Medicare, Medicaid, and Social Security from budget cuts.

The legislation creates a bipartisan Congressional committee to recommend an additional $1.5 trillion in savings. The programs spared from the initial cuts would no longer be exempt, according to guidance from the National Association of Chain Drug Stores (NACDS) and the National Community Pharmacists Association (NCPA). At risk is funding for the Department of Defense’s TRICARE program, Medicaid, Medicare Part B, and Medicare Part D.

“For now, we are okay, but later in the year, when we get the Committee report, we could see more Medicaid cuts and Defense Department cuts,” said John Coster, senior vice president of government affairs for NCPA.

The compromise package deal reached by Congress this week also developed a “fallback package,” to be triggered if the Committee does not reach an agreement on additional budget cuts by the Thanksgiving deadline. The fallback package would reduce defense spending by around 8% and other spending by 4%. “The Medicare program would no longer be exempt, but reductions in Medicare would be capped at 2%, and cuts would be directed at health plans and payments to providers, rather than beneficiaries,” wrote Carol Kelly, NACDS’s senior vice president of government affairs and public policy, in a letter to NACDS chain members.

While preventing cuts to Medicare and Medicaid in the initial round of reductions is an “important win” for pharmacies, according to Kelly, TRICARE reductions may be included in the initial round of cuts at some level. “We have already begun to develop our strategy to continue to protect pharmacy and patient care when the Congressional committee begins to consider additional reductions,” Kelly wrote.