The automatic budget cuts required under the "sequestration" deficit reduction law passed earlier this year could result in up to $11.1 billion in cuts to Medicare unless the law is overridden, according to a report issued by the U.S. Office of Management and Budget (OMB).
The OMB issued a report to the U.S. Congress regarding the Obama administration's plan to reduce the federal deficit by $1.2 trillion, as required by the Sequestration Transparency Act of 2012. President Obama signed the law in August.
The law mandates a 2% reduction in the $554.3 billion that the U.S. Centers for Medicare and Medicaid Services (CMS) projects to spend on Medicare providers and health insurance plans.
The law also requires budget reductions of 10% for nonexempt defense mandatory programs, 9.4% in nonexempt defense discretionary funding, and 7.6% to other nondefense mandatory programs.
Other healthcare-related projected budget cuts include the following:
- $5.8 billion from the Federal Hospital Insurance Trust Fund
- $2.5 billion from the National Institutes of Health
- $605 million from the Health Resources and Services Administration
- $490 million from the Centers for Disease Control and Prevention
- $318 million from the U.S. Food and Drug Administration
Additionally, CMS' healthcare fraud and abuse budget would be reduced by $78 million.
In the OMB report, the Obama administration stated that it "strongly believes that sequestration is bad policy, and that Congress can and should take action to avoid it by passing a comprehensive and balanced deficit reduction package."
The report also noted that President Obama cannot choose which programs to exempt or what percentage cuts to apply because these are dictated by a detailed statutory scheme. No amount of planning can mitigate the effects of these cuts, and sequestration is not a responsible way to achieve deficit reduction, according to the report.
