Without PAYGO Waiver, Senate Tax Bill Could Trigger Additional Federally Mandated Medicare Cuts

The Congressional Budget Office reports that a $1.5 trillion deficit increase resulting from the Senate Republicans’ Tax Cuts and Jobs Act would trigger a 4% Medicare sequester that would cut $25 billion from the program in the first year. The 4% sequester is on top of the current 2% sequester.

As we have reported, under the Senate's PAYGO budget rules, as much as $150 billion per year over the next decade would be cut from a wide range of federal initiatives in order to offset the deficit increase. Medicare alone could see cuts of $25 billion a year.

Republicans are expected to attempt to waive the 4% cut to Medicare provider-pay rates that would be triggered by the tax reform bill, but separately Congress is expected to extend the existing 2% Medicare sequester to pay for funding of the Children’s Health Insurance Program (CHIP) and other healthcare extenders that are expected to be part of a year-end omnibus spending bill. In order to waive the federally mandated cuts, however, Republicans would likely need the help of Democrats.

If the Tax Cuts and Jobs Act passes the Senate, the two chambers will go into conference to work out differences in their respective versions. We will keep you updated.