Among other things, Obama’s victory means that, in 2014, everyone will be able to get health insurance (even if they have pre-existing conditions), 30 million Americans will receive health insurance , every state will have a health insurance exchange, and more low-income Americans will be covered by Medicaid. However, before these unprecedented changes take place and other health care programs continue, there’s a fiscal cliff and sequestration to be avoided. Without a deal, the Bush tax cuts will expire and sweeping spending cuts (“sequestration”) will go into effect as of January 2, 2013.
The threat of sequestration resulted from the Budget Control Act, signed by the President in August 2011. It was intended to encourage a partisan compromise to reduce the nation’s debt ceiling in order to avoid default on the government’s debt obligations. (Health care costs are the primary driver of the skyrocketing debt.) According to the Office of Management and Budget (OMB)’s “Report Pursuant to the Sequestration Transparency Act (STA) of 2012,” sequestration would be deeply destructive to national security, domestic investments, and core government functions.” (Let’s not forget that it could also send the economy back into recession.) Among other cuts, sequestration would result in an 8.2% reduction in non-exempt nondefense discretionary funding, including a $275 million cut to the U.S. Department of Health & Human Services (HHS)’ Substance Abuse & Mental Health Services Administration and a $76 million cut to the HHS Prevention & Public Health Fund. Some agencies within HHS are continuing to release grant and cooperative agreement opportunities, but with the stark disclaimer that funding is depending on actual authorization levels.
Sequestration can be avoided if Congress passes — and President Obama signs — legislation before January 2, 2013. Alternatively, Congress could pass legislation to postpone cuts and buy time for a “grand bargain” on the federal debt and deficit, although this would lower the U.S. credit rating. Stay tuned for updated blog posts summarizing new developments related to the impending fiscal cliff and sequestration.