By law, the failure of the congressional “super committee” to issue a deficit-reduction plan this week triggers $1.2 trillion in cuts to defense spending, Medicare and other federal programs over the next decade.
But with more than a year to go before the trigger takes effect, some members of Congress are looking for alternatives to the deep cuts that could have significant effects on Connecticut’s health care providers, defense industry and programs that fund heating aid for the poor, rental assistance and environmental protection.
“They will not happen without a fight,” Rep. John Larson, D-1st District, said Monday. “You can see the fight lining up. It will be lined up on defense spending and it will be lined up on the idea of going into Medicare spending.”
“There’s time to make the cuts smart and effective in ways that they may not be now under the trigger,” said Sen. Richard Blumenthal, D-Connecticut, who added that he will fight any cuts that endanger defense programs, weapons systems or submarines like those built in Connecticut, or safety net and social programs.
Rep. Joe Courtney, D-2nd District, meanwhile, urged Congress to use a deficit reduction plan put forward by the Obama administration as an alternative to the automatic cuts. And Sen. Joseph Lieberman, I-Connecticut, called for the Senate to vote on three previously issued bipartisan debt-reduction proposals by the end of the year, rather than accede to what he called an “abdication” of responsibility to reform entitlement programs and raise revenues.
It’s unclear how much support efforts to avoid the triggered cuts will have. White House spokesman Jay Carney told reporters Monday that President Obama does not support changes to them, and House Speaker John Boehner, R-Ohio, told the Associated Press recently that he would feel bound by the trigger.
And any changes to the automatic cuts might not be on Congress’ immediate agenda. Instead, some congressional aides said the focus will likely turn to addressing issues that were expected to be included in the super committee’s work, including extending payroll tax cuts and unemployment benefits that expire at the end of the year, and averting a 27 percent cut in Medicare payments to doctors set to take effect Jan. 1.
The super committee’s inaction makes addressing those, and any possible changes to the deficit reduction plan, more difficult. Under the terms of the debt ceiling agreement reached in August, the super committee’s plan would have been subject to an up or down vote in each house, with no opportunity for amendments or filibusters.
Larson said the lost opportunity to vote on a package without the risk of a poison pill amendment or a filibuster made the super committee’s lack of agreement particularly unfortunate.
“Now everything will revert back to regular order, and so the devil remains in the details,” he said.
Cuts for Connecticut
The agreement that established the Joint Select Committee on Deficit Reduction — the super committee’s official name — requires the automatic cuts, known as sequestration, to come equally from defense and non-defense spending. The total reduction is $1.2 trillion over 10 years, but because some of the savings will come from interest, the cuts will be closer to $984 billion.
Some major programs are exempt, including Medicaid and Social Security, as well as programs run by the Department of Veterans Affairs, Temporary Assistance for Needy Families, and the Supplemental Nutrition Assistance Program, formerly known as food stamps.
Medicare beneficiaries won’t be hit directly, but providers and health plans in the program will face a 2 percent cut.
Dan DeSimone, director of Gov. Dannel P. Malloy’s Washington, D.C., office, said he expects the defense cuts to particularly hit procurement, which could affect the state’s defense industry. A new round of ballistic missile submarines is expected to be bid out later in the decade, with Groton’s Electric Boat one of two shipyards that can compete, he said; if that project gets pushed off or canceled, Connecticut could feel the hit. Similarly, any reductions in the number of Joint Strike Fighters the federal government buys could affect Pratt & Whitney, which makes their main engines.
On the non-defense side, meanwhile, the state could see cuts in the federally funded Low-Income Home Energy Assistance Program, which helps more than 115,000 Connecticut families heat their homes, as well as to grants for homeland security, environmental protection, education, economic development and community development.
As for the chances of Congress avoiding the cuts?
“It certainly wouldn’t surprise me if they decided to revisit the sequestration, but it’s hard to say,” DeSimone said. “Especially if the market or the rating agencies decide that the failure of the joint committee to act is cause for more concerns about U.S. debt, and if Congress starts to feel pressure on that front.”
Because the triggered cuts don’t take effect until January 2013, the financial arrangements between the state and the federal government aren’t suddenly going to dry up, noted Benjamin Barnes, secretary of the Office of Policy and Management, and Malloy’s budget director.
“We’ll cross that bridge when we get to it,” he said. “I’m pretty confident that we’ll find a way to maintain our fiscal discipline regardless of what happens. Obviously if there are major cutbacks, that may result in more painful decisions that we have to make here at the state level if necessary.”
While he predicted that the cuts would lead to reduced block grants for the state and possible harm for private companies that do business with the federal government, Barnes said he’s skeptical that the cuts will occur as ordered in the August deal. Because Connecticut relies less heavily on federal funds than many other states, Barnes predicted that the state will be less hard hit than others.
“I think it’s a mistake, though, to think the state of Connecticut is going to be in a position to step in and make up shortfalls in federal assistance,” he said. “That is something that is really not likely to occur.”
Effects on health care
Health care industry officials, like their counterparts in other fields that rely on federal funds, had been watching the super committee process closely, and had differing views on what the best outcome would be.
The automatic cuts, with a 2 percent reduction in Medicare funding, would be a calamity, said Matthew Barrett, executive vice president of the Connecticut Association for Health Care Facilities, which represents nursing homes.
Still, he said, “That actually is the best scenario for Connecticut nursing homes.”
That’s because the alternatives the super committee was considering could have hit the industry harder. Nursing homes rely most heavily on Medicaid, which is exempt from the cuts. Still, a 2 percent Medicare cut would be a significant hit for nursing homes, Barrett said. They tend to use the higher-paying Medicare to help make up for what industry officials say are shortfalls in Medicaid’s ability to cover the cost of care. Nursing homes also sustained a 11.1 percent cut in Medicare payments in October.
For Connecticut hospitals, a 2 percent Medicare cut would mean losing about $62 million a year, Connecticut Hospital Association spokeswoman Patty Charvat said.
The Medicare cuts wouldn’t directly affect patients’ wallets, but they could still feel the effects, according to an analysis by the Kaiser Family Foundation. Medicare Advantage plans, which are subject to the cuts, could pass along higher costs to beneficiaries through premiums or cost-sharing.
And any cuts to provider rates could make it harder for Medicare patients to find doctors willing to treat them. Doctors have already threatened to leave Medicare, or stop taking new patients in the program, because of looming rate cuts unrelated to the debt debate.
Congress has repeatedly averted the cuts in the past, and doctors’ groups had hoped that the debt talks could be a chance to address the cause of the perennial cut threats. The lack of an agreement sets that back less than two months before a 27 percent cut in Medicare rates is slated to take effect.
Although the triggered cuts don’t affect Medicaid, the health care program for the poor that covers close to 600,000 Connecticut residents, some advocates for low-income residents said they hadn’t been rooting for super committee inaction.
“We cannot expect a good outcome regardless of whether the super committee comes up with a proposal and it is accepted or not, because either way, there will substantial cuts to safety net domestic spending,” Sheldon Toubman, an attorney for the New Haven Legal Assistance Association, said Friday.
AARP was among the many groups lobbying the super committee members; its focus was on preserving Medicare, Medicaid and Social Security.
With two of those programs exempt from automatic cuts, and Medicare cuts limited to provider rates, AARP Connecticut State Director Brenda Kelley said the group’s work isn’t done.
“It’s not that we’re not worried and we’re not going to be in there working on it, because we are,” she said. “The devil is in the details.”