Daily Briefing

America avoided a debt default. Here's what that means for healthcare.


President Joe Biden on Saturday signed into law a bill that will suspend the debt ceiling for two years and cut some federal spending, avoiding a debt default that could have had a "catastrophic impact" on healthcare.

Details on the bill

The bill, called the Fiscal Responsibility Act, passed the House on Wednesday in a 314-117 vote before clearing the Senate in a 63-36 vote Thursday night. The government would have been unable to pay its bills without borrowing more money as of Monday.

The bill suspends the debt ceiling until January 2025 and cuts government spending by $1.5 trillion over the next 10 years, according to an analysis from the Congressional Budget Office. Specifically, the bill implements a 3% cap on military spending increases in fiscal year 2024, caps non-defense federal spending at $704 billion for the next two years, and provides $45 billion for a new program expanding coverage for veterans exposed to toxic burn pits.

It will also end a three-year freeze on student-loan payments, speed up large-scale energy and infrastructure projects, and raise the age by which able-bodied, low-income adults without dependents are required to work to receive food aid to 54.

The bill also claws back nearly $30 billion in unspent COVID-19 relief funds from a number of programs under CMS, NIH, and CDC, among other agencies. The biggest recission of COVID-19 funds will be from the Public Health and Social Services Emergency Fund, totaling nearly $10 billion.

However, any "priority" efforts like funding for research into next-generation COVID-19 vaccines, long COVID research, and efforts to improve the pharmaceutical supply chain, are exempted from returning their funds, which will amount to around $5 billion.

While Republicans had wanted to impose work requirements on Medicaid, the compromise bill will not alter major federal health programs, such as Medicare, Medicaid, and other policies under the Inflation Reduction Act.

Ultimately, the deal will avoid a "catastrophic impact" on healthcare, where provider payments, patient coverage, and public health efforts could have been at risk under a default.

Reaction

President Joe Biden said the debt ceiling agreement is "a critical step forward, and a reminder of what's possible when we act in the best interests of our country."

"No one gets everything they want in a negotiation, but make no mistake: This bipartisan agreement is a big win for our economy and the American people," Biden said.

In an address from the Oval Office on Friday, Biden said that passing the budget deal "was critical. The stakes could not have been higher. Nothing would have been more catastrophic" than defaulting on the United States' debt.

Marc Goldwein, SVP and senior policy director for the Committee for a Responsible Federal Budget, said the debt ceiling negotiations were another example of Capitol Hill "governing by crisis," and added that by the time 2025 comes, it's likely negotiations will once again come down to the wire, leading to the question, "Why didn't we do this sooner?"

"You have these opportunities to negotiate on it, and it feels like for the most part, policymakers won't get serious until they're up to the deadline," he said. "That's fine for a middle school student."

Steven Grossman, director of the Alliance for a Stronger FDA, noted the $704 billion cap on non-defense spending over the next two years could strain FDA's budget. After taking into account funding for medical care through the Department of Veterans Affairs and appropriations adjustments, the remaining non-defense funds available will be around $637 billion, which is roughly the same level as fiscal year 2023.

"This is never a good situation for agencies whose mission and responsibilities keep expanding each year, as is the case with FDA," Grossman said. However, Grossman noted there's still room to determine just how much funding can be allocated to FDA.

"FDA's mission and responsibilities are incredible consequential and visible," he said. "It needs resources to protect public health and safety and to set standards for products that encompass 20% of all consumer spending (about $2.7 trillion)." (Siegel et al., Washington Post, 6/1; Hughes et al., Wall Street Journal, 6/2; Pifer, Healthcare Dive, 5/30; Rovner, KFF Health News, 6/1; Hulse, New York Times, 6/2; CBS News/Associated Press, 6/3; DeGroot, Inside Health Policy [subscription required], 6/2)


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