Special Report: The Budget Deal – the Specifics

Special Report: The Budget Deal – the Specifics

Provided by Janet Kopenhaver, USWCC | Washington Representative

Congress passed a budget deal to suspend sequestration for two years, provide increases to military and domestic spending, and avoid the United States from defaulting on its financial obligations by lifting the $18.6 trillion debt ceiling. The most pressing concern in the negotiations was the debt limit issue because the U.S. was scheduled to hit the limit on November 3, 2015. In 2011, a similar scenario occurred and the result was the enactment of the sequestration caps. If the United States had faulted on its obligations, the fallout could have resulted in a total breakdown of our financial systems and our inability to pay our nation’s bills. The House passed the bill by a vote of 266-167; the Senate by a vote of 64-35.

The agreement basically ends the contentious budget battles between congressional Republicans and President Obama by pushing the next round of fiscal decision-making past the 2016 election when there will be a new Congress and a new President. However, Congress still has to pass appropriations bills before December 11, 2015 to actually distribute the funds among the many federal agencies. It is anticipated that they will pass another omnibus appropriations bill and not twelve separate measures.

Specifically the budget deal lifted the sequestration caps by including an $80 billion increase in defense and non-defense spending over the next two years. The increase was offset by an equal amount of mandatory spending cuts and increased revenue, including making changes to Medicare and Social Security programs, auctioning off wireless spectrum controlled by the government, selling crude oil from the Strategic Petroleum Reserve, and tightening tax rules for business partnerships.

The legislation also fixed a serious problem for Medicare Part B recipients by protecting them from a sharp increase in premiums. These recipients were poised to see a 52 percent rise in premiums starting next year due to a lack of inflation. Under the “hold harmless” provision of the Social Security Act, the dollar increase in Medicare Part B premiums is limited to the dollar increase in an individual’s Social Security benefit. Without a 2016 cost-of-living adjustment (COLA) for Social Security benefits, about 70 percent of beneficiaries are held harmless from any increase in their Medicare Part B premiums so the premiums will remain stable at $104.90 per month for most beneficiaries.

However, the remaining 30 percent of Part B beneficiaries who are not held harmless, including federal retirees who do not receive Social Security benefits, were on track to shoulder the full cost of the 2016 premium increase. As projected by the Medicare Trustees, these individuals would have seen their premiums rise 52 percent, from $104.90 to $159.30 per month. If the hold harmless provision did not exist, all beneficiaries would see a much smaller increase of 15 percent, to $120.70 per month.

Per the budget agreement, the standard Medicare Part B premium baseline is projected to be $120.70 per month for 2016, meaning premiums will remain at $104.90 in 2016. For most beneficiaries who are not held harmless, premiums will rise to $120.70, plus a surcharge.

Finally, the agreement will prevent a potential 20 percent across-the-board cut to Social Security Disability Insurance benefits scheduled to take place next year by transferring resources from the main Social Security fund and making changes to the program. The cost-saving revision includes allowing some recipients who can still work to receive partial payments while earning outside income and expanding a program requiring a medical expert to weigh in on whether an applicant is legitimately disabled.

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