Proposed Plan to Raise Debt Ceiling Indicates Parameters for Savings information_schema Entitlement Programs

After weeks of deadlock on debt-ceiling negotiations,
yesterday a group of Senators known as the “Gang of Six” released a
bipartisan plan to raise the debt ceiling coupled with a spending cut of $3.7
trillion from the US debt during a 10-year period, according to a press

According to the Gang of Six’s executive summary,
the plan uses a two-step legislative process that calls for an initial bill
that immediately cuts $500 billion from the US budget and calls for committees
of jurisdiction to report legislation within 6 months that would specify
savings in entitlement programs during 10 years, with specific parameters such

  • repeal of the CLASS Act, the long-term insurance program authorized
    under the Affordable Care Act;
  • reform or replacement of the Medicare Sustainable Growth Rate formula
    (at a cost of $298 billion) and fully offsetting the costs with health savings;
  • “finding” an additional $202 billion/$85 billion in health
    savings while maintaining “the essential health care services that the
    poor and elderly rely upon”; and
  • review of total federal health care spending starting in 2020 with a
    target of holding growth to GDP plus 1% per beneficiary, with an enforcement

The group has been working on a plan since the
president’s Fiscal Commission released its long-term budget
recommendations last year but faced a setback when Sen. Tom Coburn (R-Okla.)
left the group in June. Press reports indicate that Sen. Coburn rejoined the
group before its leaders, Sen. Mark Warner (D-Va.) and Sen. Saxby Chambliss
(R-Ga.), released the framework for the bipartisan deficit reduction plan.

The plan has given new hope to negotiations to raise the
debt ceiling before the Aug. 2 deadline, at which point the nation faces
default if Congress fails to act. Despite this progress, some Democratic
leaders in Congress question whether the Gang of Six agreement will be ready
for a vote by Aug. 2, according to the release.

In the House, the Republican majority passed its own
plan last night, which calls for a balanced budget amendment, steeper spending
cuts and budget process reforms in exchange for raising the debt ceiling. Known
as the “Cut, Cap and Balance” bill, the legislation is not expected
to pass the Senate and the president has already threatened to veto the
legislation if it arrives on his desk. The bill would cut mandatory spending by
$35 billion in 2012 and $76 billion in 2013, exempting Medicare and Social
Security but not Medicaid. In future years, spending would be limited to
decreasing percentages of the GDP.

According to the National Association for the
Advancement of Orthotics & Prosthetics, it remains quite likely that any
deal will include cuts to and/or reforms of entitlement programs — in the
short term or the long term — and stakeholders should remain vigilant for
the next several days, weeks and months on efforts to protect Medicare and

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