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Don’t look now, but the Republican tax bill will cut $25 billion from Medicare next year

Tim Fernholz
Sen. Susan Collins, R-Maine, is questioned by reporters as lawmakers arrive for a vote, at the Capitol in Washington, Tuesday, Oct. 17, 2017.

As both candidate and president, Donald Trump promised not to cut either Medicaid or Medicare, the government health-insurance programs for the poor and the elderly. The Republican party’s tax reform proposal, however, looks set to break that promise.

Republican leaders want their tax bill to end the individual mandate, the requirement for all Americans to have health insurance. Ending the mandate is mainly intended to reduce the burden on businesses (which pay a large share of health insurance). Moreover, the individual mandate isn’t all that popular. “Democrats may have a harder time getting people as excited to ‘defend the mandate’ as they did to ‘save Medicaid,'” Perry Bacon Jr. observed at 538.



However, might Democrats rally around a call to “save Medicare”? It turns out the tax bill will also cut billions from this program, because one of the many rules lawmakers must navigate to change US spending, the Pay-As-You-Go Act (PAYGO), requires the White House to order immediate budget cuts if deficits increase in a given year.

Because the tax bills under consideration would add as much as $1.5 trillion to the national debt over 10 years, they will violate the PAYGO rules. The Congressional Budget Office (CBO) evaluated the bill (pdf) and said the White House budget office “would be required to issue a sequestration order within 15 days of the end of the session of Congress to reduce spending fiscal year 2018 by the resultant total of $136 billion.”

CBO estimates that $25 billion would come out of Medicare, with the remaining cuts hitting other spending—including student loans, Obamacare spending to back up the individual insurance market, and even agricultural subsidies. Because discretionary spending has been cut so deeply, and programs like Medicaid and Social Security are exempt from sequestration, there wouldn’t be enough left to trim to make up the $136 billion, leaving lawmakers in a bind.



Of course, they could simply waive the rules or change them, but that would require 60 votes in the senate—a tough ask for Republicans still fretting about growing deficits (like South Carolina senator Bob Corker), or for Democrats who might not want cuts but won’t want to enable a tax bill they despise.

Losing just three Republican votes in the senate will mean the end of tax reform. Yesterday, Wisconsin Republican senator Ron Johnson came out against the bill because, he says, it doesn’t treat small business fairly compared to multinational corporations. When it comes to health care, Maine’s moderate Republican senator Susan Collins is under scrutiny. She was a key “no” vote that thwarted the repeal of Obamacare, and her constituents just passed a referendum expanding Medicaid in their state.

Between cuts to Medicare and higher premiums expected from the repeal of the individual mandate, this tax bill will also have a major impact on the health care system. Will that be enough to convince Collins to say no once more?

 

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