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Learn about policy issues important to medical schools and teaching hospitals, with Executive Vice President Atul Grover, M.D., Ph.D.

Washington Highlights

President Calls for Delay of Sequestration, CBO Releases Budget and Economic Outlook

February 8, 2013—In a Feb. 5 statement, President Obama called on Congress to “pass a smaller package of spending cuts and tax reforms that would delay the economically damaging effects of the sequester for a few more months until Congress finds a way to replace these cuts with a smarter solution.”

The president noted, “Congress is already working towards a budget that would permanently replace the sequester. At the very least, we should give them the chance to come up with this budget instead of making indiscriminate cuts now that will cost us jobs and significantly slow down our recovery.”

The president warned, “[W]e can’t just cut our way to prosperity. Deep, indiscriminate cuts to things like education and training, energy and national security will cost us jobs, and it will slow down our recovery.”  Urging “a balanced mix of spending cuts and more tax reform,” the president did not provide specific details of a plan, saying only “[t]he proposals that I put forward during the fiscal cliff negotiations in discussions with Speaker Boehner and others are still very much on the table.”

Republicans were quick to criticize the president for not submitting his budget on time, and for not providing a specific plan to balance the budget.  At a Feb. 6 press conference, House Speaker John Boehner (R-Ohio) said, “We believe there is a better way to lower the deficit, but Americans do not support sacrificing real spending cuts for more tax hikes.  The president’s ‘sequester’ should be replaced with spending cuts and reforms that put us on a path to balance the budget over the next 10 years.…”

The president’s remarks coincided with the release by the Congressional Budget Office (CBO) of its annual Budget and Economic Outlook.  CBO estimates economic growth will remain slow this year as gradual improvement in many of the forces that drive the economy is offset by the effects of budgetary changes that are scheduled to occur under current law. After this year, CBO projects, economic growth will speed up, causing the unemployment rate to decline and inflation and interest rates to eventually rise from their current low levels. However, CBO expects the unemployment rate to remain above 7.5 percent through next year.

If the current laws that govern federal taxes and spending do not change, the budget deficit will shrink this year to $845 billion, or 5.3 percent of gross domestic product (GDP), its smallest size since 2008. In CBO’s baseline projections, deficits continue to shrink over the next few years, falling to 2.4 percent of GDP by 2015.

Deficits are projected to increase later in the coming decade, however, because of the pressures of an aging population, rising health care costs, an expansion of federal subsidies for health insurance, and growing interest payments on federal debt. As a result, federal debt held by the public is projected to remain historically high relative to the size of the economy for the next decade. By 2023, if current laws remain in place, debt will equal 77 percent of GDP and be on an upward path, CBO projects.

CBO reports that net outlays for Medicare grew by 3 percent (or $16 billion) in 2012 — a slower rate of growth than any recorded since 2000.  Medicare’s outlays will increase by 4 percent (or $21 billion) in 2013, CBO estimates. 

CBO also lowered its estimate of the cost of addressing the Medicare sustainable growth rate formula. CBO projects that if the system is allowed to operate as currently structured, physicians’ fees will be reduced by about 25 percent in January 2014 and will increase by small amounts in subsequent years. CBO now estimates the cost of holding payment rates through 2023 at the levels they are now would be $14 billion in 2014 and about $138 billion over 10 years.

Contact:

Dave Moore
Senior Director, Government Relations
Telephone: 202-828-0559
Email: dbmoore@aamc.org

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Washington Highlights, a weekly electronic newsletter, features brief updates on the latest legislative and regulatory activities affecting medical schools and teaching hospitals.


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For More Information

Jason Kleinman
Sr. Legislative Analyst, Govt. Relations
Telephone: 202-903-0806
Email: jkleinman@aamc.org