H.R. 6684: Spending Reduction Act of 2012

H.R. 6684

Spending Reduction Act of 2012

Sponsor
Sen. Bernard Sanders

Date
December 20, 2012 (112th Congress, 2nd Session)

Staff Contact
Communications

Floor Situation

On Thursday, December 20, 2012, the House is scheduled to consider H.R. 6684, the Spending Reduction Act of 2012, under a rule. H.R. 6684 was introduced by Rep. Eric Cantor (R-VA). The rule for consideration of H.R. 6684 would provide one hour of debate equally divided and controlled by the Majority Leader and Minority Leader or their respective designees.

Bill Summary

H.R. 6684 would repeal the automatic defense and non-defense discretionary cuts scheduled to occur in 2013 under the sequestration provisions of the Budget Control Act. H.R. 6684 would provide mandatory spending reductions in order to replace automatic sequester cuts to discretionary spending. The bill would also provide additional spending reductions beyond those necessary to replace sequester cuts. Any additional savings in the legislation would be used to reduce the federal deficit. According to CBO, H.R. 6684 would yield net deficit reduction of $217.7 billion over the 2013-2022 period. That figure reflects changes in direct spending and revenues from provisions that would yield gross estimated budgetary savings of $314.5 billion through 2022, partially offset by the cost for the sequester replacement provisions in title VII of the legislation.

H.R. 6884 is largely similar to H.R. 5652, the Sequester Replacement Reconciliation Act of 2012, which passed in the House on May 10, 2012. Including H.R. 5652, the House Budget Resolution, and National Security and Job Protection Act, the legislation under consideration will be the fourth bill the House has passed to replace the looming sequester.

Changes from H.R. 5652: H.R. 6684 differs from H.R. 5652 in the follow ways:

 

  • Changes the long title of the bill to delete reference to “reconciliation.”
  • Changes the short title of the bill to “Spending reduction Act of 2012.”
  • Changes the table of contents to conform to modifications from H.R. 5652.
  • Strikes section 101 which contained the short title for the Agriculture title of the bill.
  • Changes the sunset date for certain spending under the American Recovery and Reinvestment Act (the Democrat’s “stimulus”) from “June 30, 2012” to “February 28, 2013.”
  • Changes the effective date of the Agriculture Title to upon enactment.
  • Changes the effective date for provisions regarding the provider tax indirect threshold from “October 1, 2012” to “June 1, 2013.”
  • Changes the authorization dates for provisions regarding making the Consumer Financial Protection Bureau (CFPB) subject to the ordinary congressional appropriations in order to allow authorizations for FY 2013 and FY 2014.
  • Strikes Title III, Subtitle D (flood insurance) to reflect prior enactment.
  • Changes the effective date of legislation regarding Social Services Block Grant (SSBG) from “October 1, 2012” to “January 1, 2013.”

 

Deficit Reduction: According to CBO, H.R. 6684 would yield net deficit reduction of $217.7 billion over the 2013-2022 period. That figure reflects changes in direct spending and revenues from provisions that would yield gross estimated budgetary savings of $314.5 billion through 2022, partially offset by a cost of $96.8 billion through 2022 for the sequester replacement provisions in title VII of the legislation. Savings contained in the legislation were produced by six House committees under reconciliation instructions contained in the House Concurrent Budget Resolution (H.Con.Res. 112). The Committees on (1) Agriculture, (2) Energy & Commerce, (3) Financial Services, (4) the Judiciary, (5) Oversight & Government Reform, and (6) Ways & Means each produced deficit reduction legislation pursuant to the reconciliation instructions in section 201 of the House-approved budget resolution.

Replacing Sequestration: H.R. 6684 would repeal the automatic defense and non-defense discretionary cuts scheduled to occur in 2013 under the sequestration provision of the Budget Control Act. The savings generated from reforms to mandatory programs would first be used to offset the cost of replacing the automatic across-the-board discretionary spending cuts that are scheduled to occur on January 2, 2013, under what is known as sequestration. The bill would also lower discretionary spending limits set forth in the BCA by $19.1 billion, from $1.047 trillion to $1.028 trillion. The cost of replacing the discretionary sequester reflects the remainder of the FY 2013 discretionary sequester after accounting for lowering the FY 2013 discretionary cap from $1.047 to $1.028 as provided for in the House-approved Budget Resolution (H.Con.Res. 112). The additional savings achieved through reconciliation beyond the amount necessary to replace sequestration would be used further reduce the deficit. According to CBO, H.R. 6684 would yield net deficit reduction of $217.7 billion over the 2013-2022 period.

Summary of Specific Provisions:The following is a summary of H.R. 5652’s specific provisions. Please note that cost estimates below are based on scoring for H.R. 5652 and may vary from H.R. 6684’s cost estimate when it is released.

 

Title I—Agriculture

 

ARRA SUNSET:  The Reconciliation bill would move up the termination date of temporary increases in food stamp benefits contained in the Democrats’ “stimulus” from October 1, 2013, to February 28, 2013. According to CBO, this provision would reduce spending by $5.9 billion over ten years.

The American Recovery and Reinvestment Act of 2009 (ARRA; P.L. 111-5) included an across-the-board increase in benefits provided under the Supplemental Nutrition Assistance Program (SNAP, formerly the Food Stamp program), effective in April 2009. ARRA effectively replaced, until after FY2018, the increase in SNAP benefits that occurs based on annual food-price inflation indexing. ARRA substantially raised maximum monthly benefits, by 13.6 percent. In the 111th Congress, Democrats reduced this increase in order to use funds to offset the costs of $26.1 billion in temporary state bailouts and expand school meal programs. Under the Democrat changes, the increased benefits are now scheduled to cease on October 1, 2013. As a result, in November 2013 SNAP benefits will revert to what basic SNAP law directs (i.e., as calculated using annual food-price inflation).

CATEGORICAL ELIGIBILITY LIMITED TO CASH ASSISTANCE:The Reconciliation bill would restrict automatic eligibility to only those households receiving cash assistance from the Supplemental Security Income (SSI), Temporary Assistance for Needy Families (TANF), or a state-run General Assistance program. Under current law, individuals can become automatically eligible for SNAP assistance based on being eligible for or receiving benefits from other specified low-income assistance programs, even if they have not met federal eligibility requirements. Under the bill, individuals would no longer be considered eligible for SNAP by receiving a TANF-funded brochure or a referral to an “800” number telephone hotline. According to CBO, this proposal would save $11.7 billion over ten years. While this change would render some households no longer eligible for SNAP, any household that meets the eligibility requirements in SNAP law will continue receiving its SNAP benefits. This policy change would only affect those who are not truly eligible for the program under SNAP law.

The Obama Administration has actively encouraged states to implement a policy called “broad-based categorical eligibility,” which means states are conveying SNAP eligibility based upon a household receiving a TANF-funded brochure or access to an “800” number hotline. As of January, there are now 43 jurisdictions—40 States, the District of Columbia, Guam, and the Virgin Islands – implementing this policy.  Of the 43 jurisdictions using broad-based categorical eligibility, 39 currently have no asset test and 27 have a gross income limit above 130 percent of the federal poverty guidelines.

STANDARD UTILITY ALLOWANCES BASED ON THE RECEIPT OF ENERGY ASSISTANCE PAYMENTS: The Reconciliation bill would change current law so that payments for Low Income Home Energy Assistance Program (LIHEAP) would no longer automatically trigger the SNAP Standard Utility Allowance (SUA) deduction. SUA allows SNAP recipients to deduct an amount of money for utility bills from a household's net income and thus increase a recipient’s SNAP benefits. According to CBO, this proposal would save $14.3 billion over ten years.

Under current law, low-income households receiving any LIHEAP payments also qualify for the SNAP SUA, which automatically increases their SNAP benefits. Approximately 16 states and DC are abusing this interaction (often at the behest of advocacy groups) by sending $1 or $5 LIHEAP checks to low-income households so they may automatically take advantage of the SUA. In practice, if a participant receives $1 in LIHEAP, they can automatically deduct the SUA from their income, so their net income goes down and they receive more SNAP benefits. For example, this can trigger as much as $130 in additional SNAP benefits per month. This provision in no way prevents those households who are paying their utility bills out-of-pocket from receiving the SNAP SUA.  Any household paying their utility bills can still receive this deduction.

END STATE BONUS PROGRAM FOR THE SUPPLEMENTAL NUTRITION ASSISTANCE PROGRAM:

The Reconciliation bill would eliminate the federal bonuses that are given to states for performing their duty to carry out the SNAP program in a responsible and efficient manner. According to CBO, this provision would save $480 million over ten years.

States are responsible for administering the SNAP program and it is their duty to process applications in a timely manner, ensure households receive the accurate amount of SNAP benefits, and make certain the program is administered in the most effective and efficient manner. Under current law, states can receive a bonus for doing a good job. Annually, these bonuses total $48 million.

FUNDING OF EMPLOYMENT AND TRAINING PROGRAMS: The Reconciliation bill would eliminate the 50/50 matching requirement that the USDA is required to provide to states that provide funding towards SNAP Employment and Training (E&T) above and beyond federal formula grants. According to CBO, this provision would save $3.1 billion over ten years.

Each fiscal year, USDA provides federal formula grants to state agencies for states to operate a SNAP E&T program. In addition to this funding, states have the option of providing more funding towards their state E&T program, which USDA is required to match. According to GAO, there are 47 federal employment training programs and almost all of them overlap with at least one other program in that they provide similar services to similar populations. This bill would maintain the federal formula grants for employment training, but eliminate the 50/50 cost share thus resulting in savings for federal taxpayers.

 

TITLE II—COMMITTEE ON ENERGY AND COMMERCE

 

Repealing mandatory funding to states to establish American Health Benefit Exchanges: The Reconciliation bill would strike the unlimited direct appropriation provided through the government takeover of health care for grants to states to facilitate the purchase of qualified health plans in newly created exchanges and rescind any unobligated funds. According to CBO, this provision would save $14.5 billion over ten years. Similar legislation (H.R. 1213) was approved in the House on May 3, 2011, by a vote of 238-183.

The Democrats’ takeover of health care provided the Secretary of HHS a direct appropriation of “such sums as necessary” for grants to states to facilitate the purchase of qualified health plans in newly created exchanges. The Secretary can determine the amount of spending and spend the funds without further Congressional action—an unprecedented authority that gives an executive branch official an unlimited tap into the federal Treasury.

REPEALING PREVENTION AND PUBLIC HEALTH FUND: The Reconciliation bill would terminate the “Prevention and Public Health Fund” created by the Democrats’ government takeover of health care.  According to CBO, this provision would save $11.9 billion over ten years. 

The Democrats’ government takeover of health care created a new “Prevention and Public Health Fund” controlled by the Secretary of HHS designed to supplement spending on public health programs (all programs within the Public Health Service Act are eligible for funding). The law created an advanced appropriation of $16 billion for the first ten years of the program and a permanent $2 billion annual appropriation for the fund in perpetuity.

RESCINDING UNOBLIGATED BALANCES FOR COOP PROGRAM: The Reconciliation bill would rescind all unobligated funds made available to the CO-OP program in the Democrats’ government takeover of health care, saving approximately $872 million over ten years according to CBO. 

The Democrats’ government takeover of health care created the “Consumer Operated and Oriented Plan” (CO-OP) program to provide government-subsidized loans to qualified non-profit health insurance plans.  The law appropriated $6 billion for such loans (H.R. 1473, the continuing resolution for FY 2011, reduced this amount to $3.8 billion). OMB has warned of potential taxpayer losses and awards given to potentially unqualified entities have raised serious concerns about CO-OPs. In the proposed rule for CO-OPs, OMB estimated that up to “50 percent of all loans” will not be repaid–jeopardizing hundreds of millions of taxpayer dollars. Union entities, some of which appear to fail to meet basic statutory criteria for program eligibility, have been the primary recipients of awards under the CO-OP program.

Revision of provider tax indirect guarantee threshold: States receive federal matching funds for revenues from taxes on health care providers that are dedicated to Medicaid.  Under current law, states are limited to a provider tax threshold of no higher than 6 percent of the net patient service revenues. The Reconciliation package would reduce that amount to 5.5 percent (the level it was at until 2011). The president’s budget called for reducing the matching level even further, to 3.5 percent. This provision would save $11.2 billion over ten years.

Repeal of Medicaid and CHIP maintenance of effort requirements under PPACA: Under the Democrats’ government takeover of health care, states are required to maintain eligibility and enrollment policies for Medicaid or CHIP as a condition of receiving federal funding for Medicaid. States cannot change income eligibility levels or implement new enrollment policies than were in effect as of March 23, 2010. This makes it more difficult for states to implement program integrity measures. The Reconciliation package removes this restriction, saving $600 million over ten years.

Medicaid payments to territories: The Democrats’ government takeover of health care increased the federal Medicaid match rate for the territories from 50 percent to 55 percent beginning in FY 2011.  Additionally, the law increased the cap on federal Medicaid spending directed to the territories by $6.3 billion over 10 years. The Reconciliation package repeals both increases, saving $6.3 billion over ten years.

REPEALING BONUS PAYMENTS FOR ENROLLMENT UNDER MEDICAID AND CHIP: Under current law, states receive federal bonus payments for increasing their Medicaid enrollment. This was made law in the Children’s Health Insurance Reauthorization Act of 2009 (CHIPRA). The Reconciliation package would repeal these bonus payments, saving $400 million over ten years.

 

TITLE III—Financial Services

 

Repeal of liquidation authority: The Reconciliation package would end “too big to fail” by repealing Dodd-Frank’s “Orderly Liquidation Authority” that gives government bureaucrats the authority to use taxpayer dollars to bail out the creditors of “too big to fail” institutions and treat similarly situated creditors differently. Eliminating the bailout fund will, according to CBO, save $22 billion over ten years.

Home Affordable Modification Program: The Reconciliation package would amend the Emergency Economic Stabilization Act of 2008 (aka “TARP”) to terminate the authority of the Secretary of the Treasury to provide new mortgage modification assistance under the Home Affordable Modification Program (HAMP), except with respect to existing obligations on behalf of homeowners already extended an offer to participate in the program. The Obama Administration claimed HAMP, its signature foreclosure prevention initiative, would help up to 4 million struggling homeowners.  Instead, HAMP has resulted in only 763,000 loans being permanently modified and has been the target of widespread and bipartisan criticism.  Of the $30 billion in TARP funds set aside for HAMP, $2.54 billion has actually been disbursed.  The Special Inspector General for TARP (SIGTARP), the Congressional Oversight Panel, the Government Accountability Office and even New York Times editorial page have all reported on the ineffectiveness of HAMP and highlighted how this program has hurt, rather than helped, many struggling homeowners. This provision would save $2.8 billion over ten years.

Bringing the Bureau of Consumer Financial Protection into the regular appropriations process: The Reconciliation package would make the Consumer Financial Protection Bureau (CFPB) subject to the ordinary congressional appropriations process and authorize the appropriation of $200 million to the agency for FY 2012 and FY 2013.  This provision would save $5.4 billion over ten years.

The centerpiece of the Dodd-Frank Act is the Consumer Financial Protection Bureau (CFPB), a large and powerful federal agency that is – by design – accountable to neither the executive branch nor Congress.  Its Director has the unprecedented and sole authority to decide which financial products Americans can and cannot use.  In addition, the Dodd-Frank Act authorizes the CFPB to fund itself by drawing money directly from the Federal Reserve to whatever extent the CFPB Director deems “necessary” up to $548 million in FY 2012, $598 million in FY 2013 and 12 percent of the Fed’s operating expenses each fiscal year thereafter.  Neither Congress, nor the President, nor the Federal Reserve which provides its funding can oversee how the CFPB Director spends these hundreds of millions of dollars. 

 

TITLE IV—COMMITTEE ON THE JUDICIARY

[The ‘‘Help Efficient, Accessible, Low-cost, Timely Healthcare (HEALTH) Act”]

 

Many state supreme courts have judicially nullified reasonable litigation management provisions enacted by state legislatures, many of which sought to address the crisis in medical professional liability that reduces patients’ access to health care and increases overall health care costs.  Consequently, in such states, passage of federal legislation by Congress may be the only means of addressing the state’s current crisis in medical professional liability, restoring patients’ access to health care, and controlling unnecessary costs.

 

To address these issues, the House Judiciary Committee has proposed the HEALTH Act, modeled after California’s decades-old and highly successful health care litigation reforms.  This reform addresses the current crisis in health care by reigning in unlimited lawsuits and thereby making health care delivery more accessible and cost-effective in the United States. California’s Medical Injury Compensation Reform Act (“MICRA”), which was signed into law by Governor Jerry Brown in 1976, has proved immensely successful in increasing access to affordable medical care. CBO pronounced that the legal reforms contained in the HEALTH Act would reduce the federal budget deficit by an estimated $40 billion over the next ten years. The following is a summary of the specific provisions of the HEALTH Act.

 

Encouraging Speedy Resolution of Claims:  The bill would states that a health care lawsuit could be commenced within 3 years after the date of manifestation of injury or 1 year after the claimant discovers, or through the use of reasonable diligence should have discovered, the injury, whichever occurs first.  In no event would the time for commencement of a health care lawsuit exceed 3 years after the manifestation of injury unless tolled for any of the following: (1) upon proof of fraud; (2) intentional concealment; or (3) the presence of a foreign body, which has no therapeutic or diagnostic purpose or effect, in the person of the injured person.  The bill would provide an exception for alleged injuries sustained by a minor before the age of 6, in which case a health care lawsuit could be commenced by or on behalf of the minor until the later of 3 years from the date of manifestation of injury, or the date on which the minor attains the age of 8. 

Compensating Patient Injury: The bill would provide that in any health care lawsuit, nothing in this bill would limit a claimant’s recovery for the full amount of available economic damages. Under the bill there would be no more than $250,000 in non-economic damages with respect to the same injury. The cap in this section would apply separately to each party with a direct personal injury. The legislation would make clear that courts should apply the $250,000 cap for non-economic damages without calculations that include discounting to present value. Juries would not be informed about the maximum award for non-economic damages. The bill would provide that each party shall be liable for the amount of damages allocated to such party. This allocation shall be determined in direct proportion to such party’s percentage of responsibility for the damages. 

Maximizing Patient Recovery: The legislation would require that courts supervise the arrangements for payment of damages rendered by a judgment in a civil action to protect against conflicts of interests. This section would also establish a sliding fee schedule for the payment of attorneys’ contingency fees.  Payments would be allocated as follows: 40 percent of the first $50,000 recovered by the claimant(s); 33 1⁄3 percent of the next $50,000 recovered by the claimant(s); 25 percent of the next $500,000 recovered by the claimant(s); and 15 percent of any amount by which the recovery by the claimant(s) is in excess of $600,000.  The fee schedule would apply whether the recovery is by judgment, settlement, mediation, arbitration or any other form of alternative dispute resolution.

Punitive Damages:The legislation would specify guidelines for awarding punitive damages.  Under this section, punitive damages may be awarded, if otherwise permitted by applicable state or Federal law, against any person in a health care lawsuit. The amount of punitive damages awarded could be as high as two times the amount of economic damages awarded or $250,000, whichever amount is greater. 

This section would not permit juries to be informed of the formula for calculating punitive damages. Moreover, punitive damages could only be awarded if it is first proven by clear and convincing evidence that a defendant acted with malicious intent to injure the claimant, or that such person deliberately failed to avoid unnecessary injury that such person knew the claimant was substantially certain to suffer.  This section would state that no demand for punitive damages could be included in a health care lawsuit as initially filed. Further, punitive damages in healthcare lawsuits would not be awarded if compensatory damages are not awarded. 

The bill would shield manufacturers and distributors of medical products from punitive damages in certain instances. The provision is intended to shield those companies that are fully compliant with all Federal Food, Drug, and Cosmetic Act (FFDCA) laws and regulations (in the case of biological medical products, full compliance with the FFDCA and section 351 of the Public Health Service Act (PHSA) is required). The FFDCA ensures the safety and effectiveness of drugs, devices, and biological products, all of which are covered by this section. Unless a claimant could demonstrate by clear and convincing evidence a lack of compliance with any FFDCA or PHSA section 351 law or regulation, then a manufacturer, distributor or supplier would be shielded from punitive damages.  All other damages, if proven, would still available to the claimant.

Under the bill, if a claimant could prove by clear and convincing evidence that a manufacturer, distributor or supplier has not complied with the FFDCA or section 351 of the PHSA, the claimant would then need to further prove that the harm attributed to the medical product resulted from the proven compliance failure.  A technical violation of the Act that is wholly unrelated to the harm would not remove the shield provided for in this section. Rather, punitive damages would only be available to claimants who could prove both a violation of the Act or regulations, and then could draw the nexus between failed compliance and harm. The bill would not create an affirmative obligation on the part of the FDA to demonstrate compliance or noncompliance for the purposes of private litigation.  The section would also revoke the shield for persons: (1) who knowingly misrepresent information to the FDA or withhold information from the FDA; (2) who bribe government officials for the purpose of obtaining approval of medical products; and (3) who caused the medical product, which caused the claimant’s harm, to be misbranded or adulterated.  

The bill would prohibit a health care provider who prescribes, or who dispenses pursuant to a prescription, a medical product that is approved by the FDA from being named as a party in a product liability lawsuit.

The legislation would provide that when the alleged harm relates to the adequacy of the packaging or labeling of a drug required to have tamper-resistant packaging, there would be no liability for punitive damages for a manufacturer or seller unless the trier of fact finds by clear and convincing evidence that the packaging or labeling is substantially out of compliance with applicable regulations.

Authorization of Payment of Future Damages to Claimants in Health Care Lawsuits:The legislation would require the court, at the request of any party, to order that the award of future damages equaling or exceeding $50,000 be paid by periodic payments as long as the liable party has sufficient insurance or other assets to fund periodic payments.

Effect on Other Laws:The legislation would state that this legislation does not apply to civil actions brought for a vaccine-related injury or death which is covered under provisions of the Public Health Service Act. It also would state that nothing in this bill should affect any defense available to a defendant in a health care lawsuit or action under any other provision of federal law.

State Flexibility and Protection of State’s Rights: The legislation would specify many of the rules governing the relationship between the HEALTH Act and state and Federal laws. Specifically, subsection 110(a) would provide that provisions governing health care lawsuits outlined in the bill preempt state law to the extent that state law prevents the application of these provisions. The bill would supersede the Federal Tort Claims Act (FTCA) to the extent that the FTCA provides for a greater amount of damages or contingent fees, a longer period in which a health care lawsuit may be commenced, or a reduced application of periodic payments of future damages. The FTCA would also be superseded if it prohibits the introduction of evidence regarding collateral source benefits, or mandates or permits subrogation or a lien on collateral source benefits.

Under the legislation if an issue would not be addressed by a provision of law established by this legislation, it would be governed by otherwise applicable state or Federal law.  The subsection further states that the bill would not preempt or supersede any law that imposes greater procedural or substantive protections for health care providers and health care organizations from liability, loss, or damages.  

The legislation would state that this legislation does not preempt any state law (enacted before, on, or after the date of enactment of H.R. 5) that specifies a particular amount of compensatory or punitive damages (or the total amount of damages) that may be awarded in a health care lawsuit.  The subsection would also provide that the bill does not preempt any defense available to a party in a health care lawsuit under any other provision of state or Federal law.

Applicability; Effective Date:The bill would provide that the provisions of the bill apply to any health care lawsuit brought in Federal or state court, or subject to alternative dispute resolutions system, that would be initiated on or after the date of the enactment of the bill, except that any health care lawsuit arising from an injury occurring prior to the date of the enactment of the bill would be governed by the applicable statute of limitations provision in effect at the time the injury occurred.

 

TITLE V—COMMITTEE ON OVERSIGHT AND GOVERNMENT REFORM

 

RETIREMENT CONTRIBUTIONS: The Reconciliation package would increase pension contributions by 5 percent of salary over five years for current federal employees. Members of Congress will pay an additional 8.5 percent of salary. These increases would bring the employee contribution to approximately 50 percent of the normal pension cost and according to CBO would save taxpayers approximately $80 billion

Federal employees benefit from one of the most generous pension programs in the country. In addition to having both a defined contribution and defined benefit plan, federal employees pay a relatively modest amount towards their defined benefit retirement. While in the private sector the cost of retirement benefits are split relatively evenly between the employer and the employee, under the defined benefit portion of the Federal Employee Retirement System, federal employees receive a lopsided 15-to-1 match for their pension. In other words, for every $1 that a federal employee contributes towards the cost of their defined benefit pension, the taxpayer is on the hook for $15.

ANNUITY SUPPLEMENT: The Reconciliation package would eliminate a benefit for federal employees who voluntarily retire before age 62 and receive annuities on top of their retirement until they reach age 62. This provision would only apply to new federal hires. The proposal permits individuals who are subject to mandatory early retirement (such as law enforcement and air traffic control officers) to continue to be eligible.

 

TITLE VI—COMMITTEE ON WAYS AND MEANS

 

RECAPTURE OF OVERPAYMENTS RESULTING FROM CERTAIN FEDERALLY-SUBSIDIZED HEALTH INSURANCE: The Democrats’ health care law fails to adequately protect taxpayers from overpayments of health insurance Exchange subsidies, even in the case of fraud. Exchange subsidy eligibility is based on two-year old income tax return data. Because income can change (new job, promotion, spouse returns to the workforce, etc.), the government will conduct an annual review to determine if someone received more taxpayer-funded subsidies than he/she was entitled to.

If an overpayment was made, the recipient is required to repay some or all of the overpayment, subject to certain limits described below. Originally, under the health care law, the maximum amount a subsidy recipient was required to repay was $250 for an individual or $400 for a family, even if he/she/they received thousands of dollars in subsidy overpayments.  Since the health care law’s enactment, two laws have increased the maximum amount of improper Exchange subsidy payments the government can recoup, but in some instances still fails to require full repayment.

The proposal would require those who receive Exchange subsidies to which they are not entitled to repay the full amount of overpayments. Individuals and families would still be allowed to keep the subsidies they are entitled to receive under the law. The Joint Committee on Taxation and CBO estimate this provision would reduce the deficit by $43.9 billion over ten years.

Social Security Number Required to Claim the Refundable Portion of the Child Tax Credit: The bill would save taxpayers billions and reduce the deficit by eliminating waste, fraud, and abuse and ensuring that federal benefits reach their intended recipient. Unlike many other tax benefits, the law does not require the taxpayer or eligible child to have a social security number in order to receive the Child Tax Credit (CTC) and its refundable component, the Additional Child Tax Credit (ACTC), which provides a refundable tax credit of up to $1,000 per child. According to a June 2011 report from the Department of Treasury, individuals who are not authorized to work in the United States were paid $4.2 billion in refundable credits in 2010. This provision would close this loophole by requiring taxpayers to provide a social security number in order to claim the refundable portion of the child tax credit.  According to the Joint Committee on Taxation, this proposal would save $7.6 billion over ten years.

REPEAL OF THE PROGRAM OF BLOCK GRANTS TO STATES FOR SOCIAL SERVICES: The Social Services Block Grant (SSBG) is a source of Federal funds that states use for a wide variety of social services.  Begun in 1956 as a way to match State spending on services to help families leave welfare, the SSBG is now a 100 percent federal funding stream that can be used to provide almost any service to anyone regardless of their income. Many of the services funded by SSBG are duplicative of other federal programs including the Community Services Block Grant, Head Start, Foster Care and Adoption Assistance, Promoting Safe and Stable Families, the Child Care and Development Block Grant, Child Welfare Services, Chafee Foster Care Independence Program, and Temporary Assistance for Needy Families, among many others.

Democrats say that ending the SSBG will end critical services for millions. The most common “critical service” supported by SSBG funds is called “information and referral services,” which were provided to 4.9 million recipients in FY 2009. “Information and referral services” are defined as providing “information about services provided by public and private service providers.” In other words, the single most common “service” supported by SSBG funds is not child care, or meals on wheels or whatever else Democrats’ overheated rhetoric suggests.  It’s to cover state administrative costs of providing people with information about and referrals to other government programs and services. This common-sense proposal would eliminate the SSBG program saving taxpayers almost $17 billion over 10 years, according to CBO.

 

TITLE VII—SEQUESTER REPLACEMENT

 

The provision would amend the Budget Control Act (BCA) to repeal the automatic discretionary cuts scheduled to occur on January 2, 2013 as a result of sequestration. The bill would remove the distinction between defense and other discretionary programs subjected to automatic cuts under sequestration and set the caps on all discretionary spending subject to sequestration at $1.028 trillion. The bill would also remove veterans’ medical care from the accounts subject to sequester under the BCA. The automatic defense and discretionary sequestration cuts repealed under H.R. 4966 would be fully replaced by accompanying legislation (the Sequester Replacement Reconciliation Act of 2012) which is also scheduled to be considered on May 10, 2012. Provision of the legislation would be contingent on the enactment of the Reconciliation legislation contained in section 201 of the FY 2013 House Concurrent Budget Resolution (H. Con. Res. 112). 

In addition, the legislation would lower the discretionary spending caps under the BCA in order to reflect the discretionary spending levels contained in H.Con.Res. 112. The bill would lower discretionary spending limits set forth in the BCA by $19.1 billion, from $1.047 trillion to $1.028 trillion. Under the BCA, the sequestration process would automatically lower the BCA discretionary limits from $1.047 trillion to $949 billion on January 2, 2013. Thus, H.R. 4966 would replace the BCA limit beginning on January 2, 2013, to ensure that the automatic discretionary cuts would not occur and to ensure that new discretionary limits reflect the amounts agreed to in H.Con.Res. 112. The legislation would have no impact on the discretionary spending levels agreed to in H.Con.Res. 112 during the first three months of FY 2013. Discretionary spending from the beginning of FY 2013 through January 2, 2013, would still be subject to the 302(a) limits set forth in the Budget Resolution ($1.028 trillion).