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Federal Budget Deal Includes Health Cuts

Late last Friday night, on the verge of the first federal government shutdown in 15+ years, President Obama, Sen. Harry Reid, and Congressman John Boehner agreed to a budget for the rest of 2011.

The agreement contains $38 billion less spending compared to last year’s budget. Thirty-four percent (34%) of the cuts come from HHS, the Dept. of Education, and the Dept. of Labor. It is, as the President notes in his address, “the biggest annual spending cut in history.” For more on the agreement and a general list the reductions it contains, see this SF Chronicle article.

There are a number of cuts specific to health care that have a direct bearing on ACA implementation. These include:

  • Removal of $3.5 billion in unused funds in the Children’s Health Insurance Program (CHIP);
  • Reduction of $2.2 billion in subsidies for the ACA’s Health Care Cooperatives, not-for-profit entities that would compete with private, for-profit health insurance companies. The cut represents half of the budget for the cooperatives in the current fiscal year, but funding levels would revert back to $4.4 billion in fiscal year 2012 unless there is further action to limit it.
  • Elimination of the ACA’s Free Choice Voucher program which would have allowed some employees to opt out of employer coverage and instead use employer money to buy insurance through the Exchange. Ending the program will save the government $4 billion over 10 years, but it wouldn’t result in any immediate spending cuts because it isn’t set to begin for three years.

Since the current occupant of the White House is the same President that signed the ACA, it is improbable that he would ever sign a law that completely undoes health reform. It is worth noting, however, that this budget compromise — a negotiated resolution that he brokered — contains significant cuts in funding to two provisions of the ACA.

While some are fearful that this marks the beginning of the end for the ACA, there probably isn’t yet cause for alarm since these two programs are not at the heart of the law. But these cuts, and last month’s removal of the 1099 reporting provision is the first time we’re seeing the ACA being chipped away and underfunded. We’ll have to wait as see whether this is a one-time cost savings step or the start to a trend in which the ACA is underfunded piece-by-piece.