Services in Question as Sequestration Looms

by U.S. Medicine

November 11, 2012

By Sandra Basu

WASHINGTON — The clock is ticking in Washington as the January 2013 implementation of sequestration looms ever nearer. Pentagon officials warned that such drastic cuts would make it difficult to pay Defense Health Program providers and likely would require denial of services to beneficiaries.

In fact, with nearly $500 billion in budget reductions already scheduled, officials said DoD essentially has nothing left to cut under sequestration. “The only thing we could do is to try to move money into that account. It would be very difficult. … You have to find something to cut,” Undersecretary of Defense (Comptroller) Robert Hale told Congress at a hearing in September.

Advocacy groups and agency officials warned of the damage that massive across-the-board budget reductions would inflict. At congressional hearings on sequestration, there was strong consensus that sequestration cuts should be avoided.

Yet, when Congress adjourned at the end of September, no agreement had been reached on a debt-reduction bill to avoid the automatic $1.2 trillion cuts, leaving the issue for a lame duck Congress to address when it returns this month.

The sequestration debate highlighted a tale of two agencies. If sequestration goes into effect, VA will escape without any mandated budget cuts. That news was confirmed in a September report from the White House, which settled lingering questions about whether VA administrative costs might be affected, if nothing else.

DoD was feeling the heat, meanwhile. If an agreement on sequestration is not reached, it stands to experience $500 billion in cuts to defense spending over the next decade, on top of $487 billion in already scheduled cuts. Sequestration would trigger about $50 billion in defense cuts in the FY 2013 budget, if nothing is done to avoid it.

“It’s extremely important that, when they return after the election, that they take steps to deal not just with this issue but with the larger fiscal-cliff problems that this country’s facing,” Secretary of Defense Leon Panetta said about Congress at the end of September. “We cannot maintain a strong defense for this country if sequester is allowed to happen, No. 1. But very frankly, just the shadow of sequester being out there continually is something that basically creates a problem for us as we try to plan for the future.”

Deep DoD Cuts

Military leaders reinforced this point during congressional hearings prior to Congress’ departure in September. They warned that, under sequestration, resources in each nonexempt account in the DoD budget would be reduced by 9.4%, including the Defense Health Program.

The Defense Health Program includes “costs associated with provisions of the TRICARE benefit, which provides for the healthcare of active-duty family members, retired members and their family members and the eligible surviving family members of deceased active-duty and retired members,” according to a program description.

That cut would likely result in difficulty paying TRICARE healthcare providers, Hale explained at a hearing on Sept. 20.

“Funds for the Defense Health Program — which provides healthcare for retirees and military dependents — would be sequestered, resulting in delays in payments to service providers and potentially some denial of service,” Hale and military officials told Congress in joint written testimony.

With the exception of the military personnel accounts, DoD cannot choose which programs to exempt under sequestration. Agency leaders noted that, even if the president exempts military personnel from sequestration cuts, DoD would still be forced to make reductions in military personnel and units beyond FY 2013 because of the expenses to train and equip units.

Though VA is technically unaffected by sequestration, DoD budget cuts also would inevitably affect that agency, advocates pointed out.

“The pressure on VA will only mount as defense budget cuts drive down force sizes and more of our military personnel re-enter civilian life,” American Legion National Commander James Koutz stated in written testimony at a separate congressional hearing, where he also sought reassurance that VA programs would be protected from cuts.

Avoiding Sequestration

At the Sept. 20 hearing, House Armed Services Committee Chairman Howard P. “Buck” McKeon (R-CA) and other Republicans pressed DoD officials on how the administration plans to implement sequestration, should it be triggered in January.

“If the Congress continues to be irresponsible and we do not address this problem, are you prepared to recommend to us an implementation procedure for sequestration that would cause the least harm to the military?” Rep. Roscoe Bartlett (R-MD) asked Hale at the hearing.

DoD officials, however, put the ball back in Congress’ court, urging lawmakers to pass a debt-reduction bill to replace the automatic cuts that will be otherwise enacted.

“If you’re driving into a brick wall at 60 miles an hour, let’s find a way to avoid the wall, not figure out a way to pick up the pieces after we hit it,” Hale said. “I believe that’s true. We need to halt this thing, rather than try to make it better, because we are not going to be able to make it fundamentally better.”

Jeff Zients, OMB’s acting director and deputy director of management, told the House Armed Services Committee this past summer that “sequestration cannot be lessened with advance planning and executive action.

“It is not the responsible way for our nation to achieve deficit reduction,” he said in written testimony. “It is not a credible substitute for a responsible deficit-reduction plan. Time remains for members of Congress to work together to produce a balanced, bipartisan deficit-reduction plan that achieves at least the level of deficit reduction agreed to in the [Budget Control Act] that the president can sign to avoid the sequestration.”

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