Capitol Report: How Medicare could see a cut thanks to the House tax bill

The tax bill House Ways and Means Chairman Kevin Brady and Republicans are pushing could trigger cuts to Medicare and other programs if Congress doesn’t act.

The tax bill that congressional Republicans and President Donald Trump are pushing may do more than cut taxes — it could also wind up cutting spending for programs including Medicare and student loans.

Here’s why: budgetary rules known as statutory paygo (short for pay-as-you-go) call for automatic spending cuts if Congress enacts bills that have the net effect of increasing the deficit by the end of the year.

The bill is estimated to cost $1.5 trillion over 10 years, meaning there would be automatic cuts of up to $150 billion a year over a decade, says Ed Lorenzen of the Committee for a Responsible Federal Budget. That’s if lawmakers don’t strike a deal before automatic cuts take effect; something Lorenzen notes they have done in the past, such as with the Bush tax cuts in 2001.

Here’s how the CRFB estimates automatic cuts would affect certain mandatory programs:

Program 2018 Sequester Cut 2027 Sequester Cut
Medicare $28 billion $56 billion
Agricultural Subsidies and Supports $14 billion $11 billion
Affordable Care Act’s Risk Adjustment Program $5 billion $9 billion
Operations and Support for Customs and Border Patrol $2 billion $3 billion
Student Loan Administration $2 billion $2 billion
All Other Programs $62 billion $69 billion
Total $114 billion $150 billion

See: The Trump tax calculator — will you pay more or less?

Say Congress does pass the tax cut before the end of the year, with paygo rules remaining in effect. Medicare alone would be cut by $28 billion next year, the CRFB has estimated, and mandatory funding for student loan administration, agricultural subsidies and customs and border patrol operations would be cut entirely. Customs and border patrol would still get discretionary funding through the congressional budget process, however.

Social Security is exempt from the automatic cuts.

Overriding the automatic cuts can be done, but as Lorenzen told MarketWatch, it would take 60 votes. That means some Democrats would have to join Republicans, since the GOP controls the Senate with 52 seats.

Also read: Here are the most expensive elements of the new tax bill.

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