Reclaiming COVID-19 Funds – Debt Limit Approval By Biden


President Joe Biden, on June 3, approved a debt limit agreement that incorporates minor reductions for healthcare programs. This action was taken just before the federal government faced the possibility of defaulting on its debt, which would have had adverse effects on the funding of Medicare and Medicaid, destabilizing them.

As per insights, the agreement will reclaim $27.1 billion in unused COVID-19 relief funds from various programs, including certain programs overseen by the CMS, a portion of which is allocated for healthcare purposes. Considering the risks faced by Medicare and Medicaid during the negotiation process, the final legislation could have been even more disruptive for the healthcare sector.

After extensive negotiations, the Fiscal Responsibility Act of 2023 received overwhelming support from both parties in the House of Representatives, with a vote of 314-117. Following this, the Senate passed the act by a vote of 63-36 on Thursday, albeit after rejecting several proposed amendments. The approval of this act was crucial before Monday to prevent the U.S. Treasury Department from running out of funds, which would have caused delays or missed payments for Medicaid and Medicare.

The agreement, which suspends the debt ceiling until January 2025, largely preserves healthcare-related federal entitlement programs, a significant achievement highlighted by the White House. Despite being targeted by Republicans in the negotiations, Medicare, Medicaid, and the Inflation Reduction Act remained unaffected by the deal, although Medicaid came close to being impacted.

The agreement excludes Medicaid work requirements, which were proposed in a debt ceiling bill passed by House Republicans in April. These requirements would have resulted in around 600,000 people losing their safety-net insurance coverage. The deal provides flat funding for non-defense spending in fiscal year 2024, with a 1% increase in 2025. Despite COVID-19 funding reductions, the Biden administration will retain approximately $5 billion for developing coronavirus vaccines and treatments in Project NextGen and covering the cost of these therapies for uninsured individuals.

However, there are concerns that the agreement’s funding limitations will hinder disease research, with the Association of Clinical Oncology calling it a “significant blow” to cancer research. The deal does establish work rules for federal food stamp recipients and those on family welfare benefits, exempting veterans and homeless individuals. While very low-income older adults may face risks to food assistance, the Congressional Budget Office anticipates increased spending on federal nutrition programs.