Why would Democrats prefer the automatic cuts? President Obama and the Democrats largely shielded the big entitlements and programs from the poor. Media reports have suggested that Budget Director Jack Lew and National Economic Adviser Gene Sperling were particularly adamant about protecting Medicaid. The super-committee, by contrast, would surely look to these programs for cuts, perhaps substantial ones. Ideas like reducing federal funding for Medicaid or raising the eligibility age for Medicare, both of which figured into earlier negotiations between Obama and House Speaker John Boehner, are sure to get a close look.
But don’t kid yourself: The automatic cuts will still hurt, because they’d still affect plenty of important programs. And among them is the administration’s signature legislative accomplishment, the Affordable Care Act.
The new health care law will make insurance more affordable by providing subsidies to people who buy insurance on their own. And these subsidies come in two forms. There are tax credits, which people can use to offset the cost of their premiums. And there are subsidies to defray cost-sharing: In other words, the government will help reduce people’s out-of-pocket costs. Under the debt ceiling deal, the tax credits are exempt from automatic reductions, because they are a tax credit and not a form of spending.
But, as both administration and congressional sources are confirming, the cost-sharing subsidies are not exempt. They will decline. And that’s worrisome because the subsidies were already pretty low. In fact, many of us were hoping that, over time, lawmakers would see fit to raise them rather than reduce them. Exactly how much the subsidies would decline is unclear, as nobody I’ve contacted seems to have run the numbers yet and it depends partly on some variables impossible to know right now. (I don't even want to guess until I get more information; I’ll update this item when I do.)