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Congress Approves Two Year Budget Deal, Raises Debt Ceiling

A two-year budget deal that raises the debt ceiling was passed by both the House and the Senate last week, and has been sent to the President’s desk. The agreement was negotiated by outgoing Speaker of the House John Boehner (R-Ohio), House Minority Leader Nancy Pelosi (D-Calif.), Senate Minority Leader Harry Reid (D-Nev.), Senate Majority Leader Mitch McConnell (R-Ky.) and the White House. The budget deal raises spending levels above the 2011 Budget Control Act sequestration spending caps by $80 billion through September 2017. The discretionary spending caps will be raised by $50 billion in fiscal year (FY) 2016 and by $30 billion in FY 2017. The additional discretionary dollars are equally divided between defense and non-defense spending, providing appropriators with top-line numbers to craft funding bills for the next two years. The package suspends the limit on borrowing until March 16, 2017. The deal also includes a provision to prevent a significant premium increase for many Medicare enrollees. One third of Medicare beneficiaries are not protected by a “hold harmless” provision that prevents their premiums from rising more than their Social Security paychecks. These beneficiaries would have been subject to a 52 percent premium hike in 2016 without the budget measure, which includes a loan from the federal government paid for by future premium hikes. The budget measures are partially offset by extending the sequester on Medicare and other mandatory spending programs by one year through FY 2025. The bill also restricts hospitals from purchasing off-site locations in order to increase outpatient services covered by Medicare. Additionally, generic drug manufacturers will now be required to pay a rebate under Medicaid should costs of drugs outpace inflation. Brand name drugs are already subject to this rebate. The budget deal is also paid for through repeal of an Affordable Care Act (ACA) requirement that would have forced large employers to automatically enroll new employees in health plans. The House passed the bill by a vote of 266-167, with the support of 79 Republicans. The bill was approved by the Senate in a 64-35 vote, with the support of 18 Republicans. Opposition to the budget agreement came from conservative members in response to the pace and behind the scenes nature of negotiations, in addition to the fact that the agreement raises sequestration-spending caps. Passage of the bill ensures that newly elected Speaker of the House Paul Ryan (R-Wis.) will not face any fiscal debates on the budget or debt limit until after the 2016 elections. Legislators will now use their revised top lines with the extra discretionary dollars to work to move either 12 individual spending bills or a single omnibus package. Passage of individual spending bills had previously been barred by Democrats pushing for a larger budget deal. Sen. Reid has pledged that his party would now cooperate moving forward, though Democrats are still expected to oppose certain appropriation bill policy riders, such as those that would block implementation of the ACA.

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