White House, Congress Eye Budget Cuts as Funding Deadlines Loom

Congress and the White House hope to avert looming budget reductions that are called for by the Budget Control Act (BCA). But Republicans and Democrats disagree on how to pay for averting or postponing the pending reductions, setting up a likely budget fight that could result in a decrease in the Medicare physician payment rate.

Although the White House and Congress reached a budget agreement on Jan. 1 that postponed a 26.5 percent reduction in the Medicare physician payment rate called for by the sustainable growth rate for one year, the deal postponed the broader sequestration budget cuts only until March 27. The sequestration cut calls for a 2 percent reduction in the Medicare physician payment rate.

If implemented, sequestration also would trigger across-the-board spending reductions, resulting in reductions of more than 7 percent in programs that are vital to primary care and family medicine. These include the National Health Service Corps and Title VII of the Public Health Service Act, among other programs. Section 747 of Title VII is the only federal program that provides funds specifically to academic departments and programs to increase the number of primary care physicians.

AAFP Board Chair Glen Stream, M.D., M.B.I., of Spokane, Wash., called on Congress to "avoid the blunt instrument approach to budget-cutting."

"We need a careful and thoughtful approach that preserves funding for essential programs, such as those that promote the primary care workforce America so desperately needs," Stream said in an interview with AAFP News Now.

Congress put the sequestration cuts in place after the Select Joint Committee on Deficit Reduction was unable to agree on federal budget reductions required by the BCA. Most lawmakers and administration officials do not want sequestration enacted because it would result in indiscriminate cuts, ultimately affecting some programs that Republicans and Democrats want to protect, said Richard Kogan, a senior fellow for the Center on Budget and Policy Priorities. But to avert or delay the cuts, Congress has to find equivalent budgetary offsets. Without a consensus on how to pay for the offsets, a budget fight is likely to ensue, said Kogan.

The cost of postponing the sequestration cuts amounts to about $24 billion, requiring Congress to find offsets that include $12 billion in new revenues and $12 billion in discretionary funding cuts, said Emily Holubowich, executive director of the Coalition for Health Funding.

"In order to delay the sequester reductions, we still (will) have cuts in discretionary spending," she added.

In this type of budgetary environment, it is possible that Congress could target Medicaid and Medicare programs for spending cuts, perhaps even making reductions in the Medicare physician payment rate that go beyond the 2 percent reduction called for by the sequestration, said Kogan.

"Sequestration is very undesirable for a number of reasons," said Kogan. "But it is completely possible to imagine polices that are even worse."

In the meantime, Congress and the White House have not reached an agreement on raising the nation's debt ceiling. President Obama says Congress is responsible for lifting the debt ceiling, and House Republicans have vowed not to vote for raising the debt ceiling unless it is accompanied by at least a dollar in new spending cuts for each dollar that the debt limit is raised.

Additionally, the continuing resolution -- a stop-gap funding measure -- under which federal government programs now are operating expires on March 27, creating the possibility of a government shutdown by the end of March.

"We now have this perfect storm of budget-cutting," said Holubowich. "There are no sacred cows. With the level of spending cuts being discussed, primary care programs would absolutely be hit. Unfortunately, we don't know yet know the extent of the potential damage."

The AAFP currently is working on plans to encourage Congress and the White House to ensure any cuts that do come out of further budget negotiations do not adversely affect primary care physicians or their training programs. Such cuts could stifle progress on building the foundation of primary care in the United States that is the focus of health care reform efforts.