Legislation employing across-the-board budget cuts, such as the Commitment to American Prosperity (CAP) Act, which seeks to meet “arbitrary” federal spending caps, could have serious consequences for vulnerable U.S. citizens, such as the aged, disabled and impoverished, based on a Lewin Group report. The AARP, American Hospital Association, American Medical Association and American College of Cardiology supported the report.

The Congressional Budget Office (CBO) estimates that the federal budget deficit will total $6.97 trillion over the 2012 through 2021 period. “Concern over the growing deficit has resulted in legislation introduced in the U.S. Senate and the House of Representatives that would cap spending at specified levels of gross domestic product (GDP),” noted the report authors.

The Lewin Group report focused on the CAP Act, which has been introduced in both the Senate (S 245) and the House of Representatives (HR 1605), which seeks to limit federal outlays (i.e., federal spending) so they do not exceed pre-determined levels of spending as a percentage of the GDP. By 2021, total federal spending would be reduced from a projected 24 percent of the GDP under current law to about 20.8 percent of the GDP under the CAP Act. 

Using data from the CBO, the analysis estimated that the CAP Act would cut $4.2 trillion from federal spending between 2013 and 2021. This would “greatly impact” programs such as Social Security, Medicare and Medicaid that serve a growing aging population. 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, according to the report.

Under the CAP Act, the report noted 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 below the federal poverty line—2.1 million of them seniors, a 44 percent increase among this age group.
• 5.1 million individuals could lose their health insurance.
• Reductions in fees for physician services would lead to fewer physicians participating in Medicare.
• Cuts to hospitals could force most to operate in the red.
• Up to 1.3 million healthcare workers could lose their jobs, primarily in support positions.
• 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.

If implemented together with the scheduled physicians’ cuts of 29.5 percent in 2012 under the Medicare sustainable growth rate (SGR) formula, the report estimated that Medicare payment levels would be at or below Medicaid payment levels in most states, which are already so low that many physicians do not participate in Medicaid; and physician supply of services for Medicare beneficiaries would fall by up to 24 percent. 

The purpose of this case study, according to the Lewin Group, is to illustrate the impact that these spending reductions would have on people who depend upon federal programs for income and healthcare. While the authors acknowledged that 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. Therefore, the groups are urging Congress to reject proposals that call for arbitrary spending caps that will have a "detrimental impact."

For more information, view the findings of the full report.