Medicaid and Budget Deals: The New ‘Cliff’

On January 1, 2013, Congress agreed to a deal offered by the White House that averted the so-called ‘fiscal cliff.’ The agreement, passed into law as the American Taxpayer Relief Act of 2012, did not include feared cuts to social programs. However, new budget negotiations and the debt ceiling increase are right around the corner. Once again, Republicans are expected to call for Medicaid cuts as part of both processes. Read this briefing paper from Families USA to learn more about this critical upcoming issue and find out what you can do to be prepared.

It’s important for advocates to keep reminding
their representatives in Congress that Medicaid is a critical program and should not be cut.

Here’s a quick overview of where we are now.

  • No tax increase for most; some revenue from the highest earners
    • Congress agreed to extend the Bush-era income tax cuts for individuals making less than $400,000 ($450,000 for a family). Taxes go up for those with higher incomes.
  • „ No cuts to Medicaid
    • The agreement does not cut Medicaid, Medicare, or Social Security, and the majority of the Affordable Care Act is unchanged. 
  • Some Medicaid programs extended
    • The law extends some programs and options in Medicaid. For example, it extends the Transitional Medical Assistance (TMA) program for one year. This program allows low income families to maintain their Medicaid coverage as they transition into employment and increase their earnings. It also extends the Medicaid and CHIP Express Lane eligibility option through September 30, 2014. 
  • „ Automatic cuts delayed
    • The agreement delays for two months the automatic spending cuts (the sequester)that were scheduled to start in January. However, without further action, the automatic spending cuts will go into effect in March. Half of those cuts will come from defense spending and half from other programs. Medicaid, Medicare, and Social Security are exempted from these automatic cuts. (For background on the automatic cuts, see Families USA’s piece, Will Congress Throw Medicaid Off the Fiscal Cliff?, available online at
  • „ Debt ceiling vote still looming. 
    • The agreement does not address the debt limit. In February or March, the debt limit will need to be raised to prevent the United States from defaulting on its obligations.

What happens next?

Congress and the White House will still want to avoid the automatic spending cuts that
are now scheduled to take place in March, but to do that without increasing the deficit,
they will need to increase revenue or cut spending.

At the same time, the government’s debt ceiling will need to be raised in February or
March. It was congressional refusal to raise the debt ceiling in 2011—and the threat of
a U.S. default on its obligations—that forced the budget negotiations that gave us the
automatic cuts we are facing now. Until 2011, Congress routinely raised the debt limit
when needed, without lengthy debate.

As Congress faces these two deadlines, Republicans will undoubtedly call for cuts to
Medicaid, changes to the program’s structure, or both, in exchange for avoiding automatic
spending cuts or agreeing to raise the debt ceiling. As we look ahead, Medicaid is not even close to being out of the woods.

What Advocates Need to Do

For the next two months, advocates need to remind their representatives in Congress that
Medicaid is a critical program that should NOT be cut.

Our message remains the same.

  • „ How we bring down our deficit says a lot about who we are as a nation. 
  • „ We shouldn’t balance our budget on the backs of low-income people, particularly seniors, people with disabilities, and children.
  • „ Thoughtful, fair, and balanced deficit reduction won’t cut Medicaid.

Additional resources:

Families USA’s Medicaid Defense Center
Cutting Medicaid: Ineffective and Harmful, available online at