Last week, the House passed the Sequester Replacement Reconciliation Act and the Sequester Replacement Act. Together, these bills seek to repeal and replace the automatic spending cuts the Budget Control Act (BCA) mandates for this January as directed under the House-passed budget resolution.

The Sequester Replacement Act would prevent $98 billion of the $109 billion in across-the-board cuts scheduled for FY 2013 defense and non-defense spending accounts, while the Sequester Replacement Reconciliation Act of 2012 would replace the automatic cuts in part with $261 billion in reductions by repealing numerous programs from the Affordable Care Act. This legislation also proposes to place restrictions on state medical malpractice cases along the lines of H.R. 5 as previously passed by the House.

Senate Majority Leader Harry Reid (D-NV)declared the bill dead on arrival in the Senate and in the unlikely event it should pass, the White House has said it would veto the legislation. The bill makes spending reductions in programs under the jurisdiction of six committees totaling about $315 billion over the 10-year budget window.

The following are the major health program related 10-year budget savings:

  • $23.5 billion from Medicaid and SCHIP, including scrapping the PPACA maintenance-of-effort requirements
  • $43.9 billion by allowing the recapture of all overpayments of PPACA subsidies
  • $14.1 billion by eliminating HHS authority to award PPACA health insurance exchange grants
  • $10.9 billion by eliminating the PPACA Prevention and Public Health Fund
  • $300 million by cancelling unobligated balances for the Consumer Operated and Oriented Plan (CO-OPs)
  • $4.2 billion from hospital disproportionate share payments
  • $11.3 billion by lowering from 6% to 5.5% the threshold for state and health care provider hold harmless agreements; and
  • $6.3 billion by eliminating increased Medicaid payments to territories.

With the Senate backed-up over budget matters until after November’s elections, Senate Republicans will nonetheless propose several budget plans as a reminder that the Senate has not passed a budget resolution in three years. The success of negotiations on budget matters after the election will likely ride on the election results. If Congress fails to defer or override the BCA mandated cuts beginning next January 2, the cuts for health agencies would be significant: about $2.4 billion for NIH, $445 million for CDC, $191 million for the FDA, etc.