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Congress Can Pass Bills to Reduce the Deficit This Year

Mar 4, 2016 | Budgets & Projections

House Members appear to be resolving a disagreement over what this year’s discretionary spending cap should be. Some House Republicans have been asking Congress to retroactively pay for the $30 billion increase in the FY 2017 discretionary caps that was authorized in last year’s Bipartisan Budget Act (BBA), which we have shown only truly offset half of its spending. According to press reports, mandatory savings are being identified to offset the $30 billion in sequester relief.

Regardless of the reason, we welcome the use of reconciliation instructions to reduce mandatory spending since the debt remains on an unsustainable course and 88 percent of non-interest spending growth over the next decade will come from the mandatory portion. Much of the discussion surrounding potential mandatory savings assumes that it even if it passes the House, it would have little chance of becoming law. But proposals with bipartisan appeal are available, and we need to look no further than the President’s budget for such mandatory savings ideas that could be enacted this year.

The table below lists several policies that lawmakers could use to develop a package of mandatory savings. Additional savings could be achieved by including items that were in previous budgets submitted by the President, including switching to chained CPI, which would save $332 billion over ten years, and limits on Medicaid provider payments, which would save $60 billion.

Policies in the President's FY Budget that Could Be Included in a Reconciliation Bill  
Policy 2017-2018 Savings1 10-Year Savings1
Reduce agriculture subsidies $2.8 billion $18 billion
Reform student loan income-based repayment $3.4 billion $48.9 billion
Bundle payments for post-acute care  $0 $9.9 billion
Reform Indirect Medical Education payments $2.6 billion $17.8 billion
Reduce Medicare bad debt reimbursement $1.8 billion $32.9 billion
Limit physician self-referral exception $0.3 billion $5 billion
Reform Medicare hospice payments $0.2 billion $9.3 billion
Institute competitive bidding for Medicare Advantage Plans $1 billion $77.2 billion
Modify reimbursement for Medicare Part B drugs $0.4 billion $7.8 billion
Competitive bidding for durable medical equipment  $0 $3.8 billion
Increase Medicare income-related premiums  $0  $41.2 billion
Modify Part B deductibles for new beneficiaries  $0 $4.2 billion
Institute home health copayment for new beneficiaries  $0 $1.3 billion
Encourage low-income beneficiaries to use generic drugs $0.6 billion $9.6 billion
Rebase future Medicaid DSH payments  $0 $6.6 billion
Reform aviation passenger security fees $0.4 billion $5.4 billion
Extend round-down of veterans' COLAs $0.1 billion $2 billion
Impose spectrum license user fee & auction domestic satellite services $0.6 billion  $4.8 billion
Total $12.4 billion $272.8 billion
Source: Office of Management and Budget
1 All numbers are based on OMB estimates of savings, CBO may estimate lower savings for some policies

Though these proposals may not be politically easy to enact, one could look to last year’s budget resolution as proof of their viability. For instance, the agriculture savings recommended in the President’s budget are less than the savings assumed in the FY 2016 budget that Congress adopted. Likewise, the reductions in Medicare provider payments are less than the total Medicare savings assumed in the FY 2016 budget resolution. At a minimum, the list above provides a menu of options that could form the basis of negotiations on a package of mandatory savings this year.