Covid relief bill may trigger $36 billion cut to Medicare, higher student loan fees

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  • A $1.9 trillion Covid relief bill backed by Democrats may trigger billions of dollars in cuts to Medicare and other federal programs, like ones supporting student loan borrowers.
  • Republicans are using the automatic cuts — caused by a law called PAYGO — to argue against the pandemic stimulus.
  • Congress can, and likely would, override those cuts, according to budget experts.

A Covid relief bill backed by Democrats could trigger billions of dollars in cuts to Medicare and other federal programs, like ones that support unemployed workers and student-loan borrowers, if it’s ultimately passed.

The funding cuts would take effect in 2022 and last for several years.

Republicans are using the specter of pullbacks to argue against issuing more pandemic aid, which includes $1,400 stimulus checks and more jobless benefits.

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It’s unclear lawmakers would allow them to occur. Even if they survive, the exact impact of cuts on consumers is uncertain.

The cuts may automatically increase fees on federal student loans, for example, according to the Office of Management and Budget.

Some doctors and hospitals may opt not to accept Medicare due to lower cost reimbursements from the federal government, according to budget experts. Providers may also try to pass extra costs to consumers.

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The cuts are due to a rule — the PAYGO Act — that corrects for additions to the federal deficit by automatically pulling back funding from certain departments and programs.

The pandemic aid measure would raise the federal deficit by $1.9 trillion over a decade, according to a Congressional Budget Office memo issued Thursday by director Phillip Swagel.

As a result, Medicare funding would be trimmed by 4%, or $36 billion, starting next year, said Swagel. His estimates were in response to a question from House Minority Leader Kevin McCarthy, R-Calif.

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Democratic and Republican representatives debate Biden’s stimulus bill
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