Across-the-Board Spending Cap Would Have Devastating Consequences for Real People

Consumer and provider groups come together to highlight real-world impact

WASHINGTON, June 22, 2011 /PRNewswire-USNewswire/ -- Consumer and health care provider groups today released a study that highlights the real-world impact across-the-board spending cuts in federal programs could have on some of our nation's most vulnerable people, including the elderly, children and low-income families.  The groups include AARP, American Hospital Association, American Medical Association, American College of Cardiology and LeadingAge.

As Congress considers ways to cut our nation's spending, many proposals under consideration call for across-the-board spending cuts based on arbitrary caps or targets.  The groups commissioned The Lewin Group to examine and illustrate how everyday Americans could bear the burden of one such proposal, the Commitment to American Prosperity (CAP) Act.  This bill would limit federal spending to about 20.8 percent of Gross Domestic Product and automatically cut across all federal programs in any year where spending is projected to exceed the cap.  

The Lewin Group analysis found that the CAP Act would cut $4.2 trillion from federal spending between 2013 and 2021.  This will greatly impact those programs such as Social Security, Medicare and Medicaid that serve a growing aging population and those who have been adversely impacted by the economic downturn. Specifically, cuts for major programs over this period would be:  $1.3 trillion in Social Security; $859 billion under Medicare; and $575 billion in federal Medicaid payments to states.

Under the CAP Act, the report found that by 2021:

• Social Security benefits would be cut by nearly 20 percent.
• Cuts to Social Security and other income support programs would force 3.8 million people into poverty -- 2.1 million of them seniors, a 44 percent increase among this age group.
• 5.1 million individuals could lose their health insurance.
• Dramatic reductions in fees for physician services would lead to fewer physicians participating in the Medicare program.
• Cuts to hospitals could force most to operate in the red, jeopardizing access to care.
• Up to 1.3 million health care workers could lose their jobs, further driving up unemployment.
• Cost shifting of federal payment shortfalls to private employers could lead to a nearly 5 percent increase in health insurance premiums for those in employer-sponsored plans.

"AARP understands the nation's long-term fiscal challenges must be confronted, but this discussion cannot simply be reduced to a budget exercise—this is about real people," said David Certner, AARP's Legislative Policy Director.  "We oppose proposals that rely on arbitrary spending limits because they could result in harmful cuts to the critical Medicare, Social Security and long-term care benefits that allow millions of older Americans to live independently and age with dignity. Such proposals threaten the financial and health security of today's seniors and future generations."  

"The American College of Cardiology supports efforts to balance the federal budget through a rational and focused approach," said Jack Lewin, M.D., CEO of the American College of Cardiology. "We believe the best way to control medical costs in the long run while ensuring quality care to vulnerable populations is through the implementation of outcome-based initiatives, which result in better care at lower costs."  

"Arbitrary caps that don't take into account the growing health care needs of our aging population are bad news for the patients and communities hospitals serve," said Rich Umbdenstock, President and CEO of the American Hospital Association.  "Hospitals are already absorbing more than $155 billion in federal reductions as well as billions more in reductions in state Medicaid programs.  Additional cuts of this magnitude would force most hospitals to operate in the red, just at a time when more people are turning to them for care."  

"Physicians appreciate the need to reduce our nation's deficit, but it must be done strategically rather than with across-the-board cuts that harm vulnerable patient populations," said American Medical Association President Peter Carmel, M.D. "We know from experience that across-the-board cuts to federal health programs are counterproductive to health system improvements and will ultimately limit access to care for patients. With baby boomers entering Medicare and more patients joining Medicaid, the AMA encourages policymakers to focus on policy changes that will protect vulnerable patients while improving the fiscal health of the nation."

"We cannot force our nation's most vulnerable citizens and their families to bear the brunt of federal budget deficit reduction," LeadingAge CEO Larry Minnix said. "It's unethical, unconscionable and unsound economics."

While the CAP Act may or may not be a part of any final package to increase the debt ceiling, similar consequences could result from any across-the-board measure that sets specific limits on spending. The groups are urging Congress to reject proposals that call for arbitrary spending caps that will have a detrimental impact on real people.

For more information, view a summary of the findings or the full report.

SOURCE AARP; American College of Cardiology; American Medical Association; LeadingAge; American Hospital Association