Impacts on Health Care With a Debt Ceiling Breach?
We’ve discussed the debt ceiling in several pieces earlier this year. The debt ceiling relates to payments on past U.S. debt obligations, not current or future spending. However, the debate playing out attempts to tie negotiations on the debt ceiling to current and future spending constraints among other issues.
CLA Article: What Congress Is Facing in 2023 and How It Affects Health Policy
CLA HI2 Blog: Two “Must-Dos” Face Congress: Debt Ceiling, Funding Government
Secretary Yellen stated in a May 1 letter to Congress that, “Treasury will likely no longer be able to satisfy all of the government’s obligations if Congress has not acted to raise or suspend the debt limit by early June, and potentially as early as June 1.” She hardened that stance on Sunday morning when stating June 1 was a “hard deadline” but then hedged a bit Monday about the exact date. Either way, early June does not leave negotiators much time.
Some of the larger negotiation issues are:
- Capping federal funding/spending levels for 2024. Will they agree to a cap? Will it be at 2022 or 2023 levels?
- Defense funding vs nondefense. Will capped levels include defense spending?
- Work requirements. Will work requirements be added to certain programs like SNAP?
Don’t forget that federal government funding runs out on September 30 and 2024 is a Presidential election year. These dates also become part of the negotiations — will the debt ceiling be raised through 2024 (i.e.: past the elections) or will there be a short-term suspension that gets Congress only through this fall budget process?
Health care impacts
What happens to health care providers and organizations in the event of a breach? It depends on many factors, including the length of a breach. The longer a breach, the worse the impacts.
Generally, direct impacts could relate to the following:
- Medicare and Medicaid payments. How Treasury/President prioritize which payments to make first with existing revenues could mean some reimbursements for health care get trimmed or delayed. This would impact all health care industry segments receiving Medicare or Medicaid reimbursements.
- Other federal health program funding. Programs like veterans’ health care or the ACA health exchange subsidies may also see delays/cuts.
- Any federal program or agency that health care depends on could see delays (staff furloughed, payment delayed)
Indirect impacts to health care providers and organizations could relate to the following:
- Financing, borrowing become more expensive
- Investments take a hit if the markets are roiled
- Operational impacts (ex: staffing levels)
- Supply chain impacts (ex: global market, higher prices)
- Individuals may delay care
In a sense, the indirect impacts on health care could resemble COVID’s impact but would be far worse because there will be no economic stimulus money nor increased Medicare/Medicaid payments to offset increased expenses or revenue losses. When some organizations and providers have yet to fully recover from COVID, this is a concerning thought to entertain.
Closing Thoughts
With COVID barely behind us (kind of) and on again, off-again talk of recession, it seems dicey to fail to come to an agreement. No matter what, we are here to help you navigate whatever lies ahead.
Jennifer Boese is the Director of Health Care Policy at CLA. She is a highly successful public policy, legislative, advocacy and political affairs leader, including working in both the state and federal government as well as the private sector. She brings over 20 years of government relations and public policy knowledge with her to CLA. Well over half of her career has been spent dedicated to health care policy and the health care industry, affording her a deep understanding of the health care market and environment, health care organizations and health care stakeholders. Her role at CLA is to provide thought leadership, policy analysis and strategic insights to health care providers across the continuum related to the industry's ongoing transformation towards value. A key focus of that work is on market innovations and emerging payment models. Her goal is to help CLA clients navigate and thrive in an increasingly dynamic health care environment.
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