President Joe Biden signed a debt limit deal on Saturday that includes some minimal cuts for healthcare programs just days before the federal government was set to default on its debt, which would have destabilized funding for Medicare and Medicaid.
Congressional scorekeepers estimate the deal will claw back $27.1 billion in unspent COVID-19 relief funding from dozens of programs, including some maintained by the CMS. Some of that funding is healthcare-related. With Medicare and Medicaid at risk during negotiations, the final legislation could have been more turbulent for the industry.
The House of Representatives voted 314-117 in support of the the Fiscal Responsibility Act of 2023 on Wednesday night after weeks of negotiations, with members of both parties backing the deal. The Senate passed it 63-36 late Thursday after rejecting a number of proposed amendments.
Approval of the deal was required before Monday, when the Treasury Department expected the U.S. would run out of money to meet its payment obligations. That would have likely resulted in missed or delayed Medicaid payments to states and Medicare reimbursements to providers.
Despite being targeted by Republicans during negotiations, Medicare, Medicaid and the Inflation Reduction Act were not impacted by the deal, though Medicaid came closest.
The agreement excludes Medicaid work requirements; House Republicans in April passed a debt ceiling bill that would have included the controversial policy. Those requirements would have resulted in an estimated 600,000 people being booted from the safety-net insurance coverage.
The deal includes flat funding for non-defense spending in fiscal year 2024 and a 1% increase in 2025. Despite the COVID-19 funding clawbacks, the Biden administration will retain about $5 billion to develop coronavirus vaccines and treatments in Project NextGen and to cover the cost of those therapies for uninsured people.
However, some industry groups are saying the agreement’s funding limitations will restrict disease research, with the Association of Clinical Oncology calling it a “significant blow” to cancer research.
The deal does enact work rules for people receiving federal food stamps and those on the family welfare benefits program. Veterans and homeless people would be exempt from food stamp work requirements.
Though the provisions put food assistance at risk for very low-income older adults, the Congressional Budget Office estimates the changes will actually increase spending on federal nutrition programs.