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Deal on Payroll Tax, Doc Fix, Unemployment

Congressional leaders have reached a tentative deal on a payroll tax cut, extend unemployment benefits, and delay rate cuts to doctors who treat Medicare patients.  Under the proposed plan, a 2-percentage point payroll tax cut would be extended until the end of this calendar year.  The cost of this tax cut would be added to the federal deficit. Unemployment benefits would also be extended for the next 10 months and doctors who treat Medicare patients would avoid seeing their payments cut. Those two provisions would cost about $50 billion and be paid for with cuts elsewhere in the federal budget.

One of the most sensitive issues in the final negotiations was the question of how much Medicare should compensate hospitals for the bad debt accumulated when patients don’t provide their required co-pays for care (uncompensated care). Medicare currently compensates hospitals for 70 percent of their loss and the House proposed to cut this to 55 percent — saving more than $10 billion over 10 years. But this puts a heavy burden on hospitals that provide a lot of uncompensated care – like Harborview.  The final compromise lowers the bad debt cut to about $7 billion, which is better than the original proposal from a couple of months ago but it will still be a blow to hospitals with low-income patients.

FY13 President’s Budget Request

The President is scheduled to deliver his FY13 budget request to Congress later this morning, kicking off the annual budget and appropriations season. While the details of the budget have remained under wraps until today, the Office of Management and Budget (OMB) released a 2013 “Fact Sheet” on Friday revealing that the budget will include strong support for research and development, including “$140.8 billion for R&D overall; increase the level of investment in non-defense R&D by 5 percent from the 2012 level, even as overall budgets decline; maintains the President’s commitment to double the budgets of three key basic research agencies (National Science Foundation, Department of Energy’s Office of Science, and National Institute of Standards and Technology Laboratories); expands and makes permanent the R&D tax credit. [Includes] Level funding for biomedical research at NIHNational Institutes of Health ($30.7 billion); and to get more out of the money, proposes new grant management policies to increase the number of new research grants by 7 percent.”

The President will also request $4 trillion in deficit reduction over the next decade in his FY13 budget, but his proposal to pay for it with revenue increases and spending cuts — already rejected by the special deficit reduction panel last fall — will make it tough to sell to Congress. Half of the deficit reduction would come by increasing revenues, including raising $1 trillion over 10 years by increasing taxes on families earning more than $250,000. Obama’s proposal would cut the deficit to $901 billion by the end of FY13, or about 5.5 percent of the gross domestic product. All told, his proposal would reduce accumulated debt by $3 trillion in addition to the $1 trillion in savings over 10 years already put in place by the BCA. If approved, Obama’s plan would void the automatic across-the-board cuts— known as a sequester— due to kick in January 2013.

Once the budget request is delivered to the Hill, both the House and Senate canCures Acceleration Network begin the annual appropriations process. The usual first step in that process is for both chambers to approve a budget resolution, which gives appropriations committees their top-line numbers on how much to appropriate. This year, however, Senate Majority Leader Harry Reid (D-NV) has announced that he won’t move a budget resolution to the floor, even if the Senate Budget Committee approves one, since the Budget Control Act (BCA) approved last August already specified the top-line number for FY13. In the House, Budget Committee Chairman Paul Ryan (R-WI) will move a budget resolution through his committee, which will likely specify a top-line number even less than what was agreed to in the BCA.

White House Unveils Draft ‘College Scorecard’

The White House is seeking input from colleges and consumers about a draft “College Scorecard” that would provide prospective students with information about a college’s cost, graduation rate, average debt burden, loan-repayment rate, and job-placement rate. The scorecard, which President Obama announced in a speech at the University of Michigan last week, is designed to make it easier for students and their parents to comparison-shop for college.  Read more here.

Effort Begins to Repeal Sequester

Senate Republicans are posed today to initiate an effort to block automatic budget cuts scheduled to take place next January.  They will propose replacing the first year of the spending “sequester” with a plan to shrink federal employment and extend a pay freeze on government workers.  The effort is an attempt to stave off what many view as potentially devastating cuts to the Pentagon.

Late last year, House Armed Services Chairman McKeon (R-CA) offered a similar proposal (HR 3662) that quickly received a veto threat from the White House.  McKeon’s legislation would save more than $120 billion over a decade, effectively offsetting the first year of the statutory sequester of both defense and non-defense spending. That would push off until FY14 the spending cuts triggered the Budget Control Act (PL 112-25) that was approved by Congress last August.

The Senate’s proposed bill, the Down Payment to Protect National Security Act of 2012, will add credibility to the sequester repeal effort due to the high-profile sponsors of the bill, including Senators Jon Kyl (R-AZ), John McCain (R-AZ), John Cornyn (R-TX), Lindsey Graham (R-SC), and Kelly Ayotte (R-NH).

Like McKeon’s measure, the Senate legislation would replace $109 billion in estimated, across-the-board spending cuts that are set to kick in January 2, 2013 with savings from a reduction in the federal workforce over a decade.  McKeon’s proposal would trim the workforce by 10 percent by replacing every three workers who leave an agency with just one new hire.  The Senate bill would cut the workforce by 5 percent, replacing every three full-time workers who leave with two new hires.  The Senate bill goes farther than the House measure by also finding savings by extending the current pay freeze for federal civilian workers until June 30, 2014.  Contrast that will what is expected to be in the President’s FY13 budget request: a 0.5 percent pay bump for federal employees in his budget proposal due February 13th, bringing an end to the two-year freeze.

Senator Murray (D-WA) has already expressed her opposition to the GOP plan via Twitter, where she posts “GOP to lay out plan to avoid def. cuts tmw. Who thinks it will also avoid having wealthy pay fair share? Ask only middle class sacrifice?”

Sequestration: What it means for Federal Research Funding

Automatic spending cuts, or sequestration, was established through the Budget Control Act passed by Congress last August and is set to go into effect January 2013.  The sequestration process has great implications for all federal discretionary programs, including most – if not all – of federally funded research programs. Below is a link to a detailed explanation of this process and the impacts to federal spending in both the short- and long-term.

Sequestration_Details