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The Budget Control Act of 2011: Implications for Medicare

Beginning January 2013, Medicare spending will be subject to automatic, across-the-board reductions, known as “sequestration,” which is slated to reduce Medicare payments to plans and providers by up to 2 percent. This sequestration results from provisions in the Budget Control Act of 2011, which raised the debt ceiling and will reduce net federal spending by $2.1 trillion over ten years. The Act was a bipartisan compromise negotiated between the Administration and Congressional leaders, just before the nation was to breach the debt ceiling.

The Budget Control Act set forth a process to reduce federal spending and established a Joint Select Committee on Deficit Reduction, known as the “Super Committee”, which failed to reach a bipartisan agreement. As a result, the Act required automatic reductions in spending, beginning in 2013. This sequestration is projected to reduce Medicare spending by $11 billion in Fiscal Year 2013.

This updated brief provides an overview of the Budget Control Act and describes the timeline and process for raising the debt ceiling and lowering the federal deficit. It also describes the role of the Joint Select Committee on Deficit Reduction, how Medicare spending could have been affected by changes proposed by the Committee, and how it could be affected by sequestration.

The brief is a product of the Kaiser Project on Medicare’s Future, which focuses on producing timely analysis of leading reforms affecting people on Medicare.

Issue Brief (.pdf)