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Sequestration: More Threats to Rural in Tax Reform

This afternoon, the House of Representatives voted to pass the Tax Cuts and Jobs Act. At this time, the Senate is still debating and working on their own version of a tax reform package. It is likely that each chamber will pass different tax reform legislation and must go to conference to reconcile the two pieces. Unfortunately, right now, it looks like both bills will be bad for rural America.

On Tuesday, the nonpartisan Congressional Budget Office (CBO) released their report for the House of Representatives tax reform legislation, the Tax Cuts and Jobs Act, and found that it would raise the deficit by nearly 1.5 trillion dollars over 10 years. The Statutory Pay-As-You-Go Act of 2010 (PAYGO) requires that new legislation passed during a term of Congress does not collectively increase estimated deficits. The Office of Management and Budget (OMB) tracks any legislation that impacts revenue or mandatory spending and keeps a scorecard on the legislations’ effects. At the end of each year, OMB analyzes the scorecard to see if the legislation has increased the estimated deficit. In the case of an increase, OMB is required to implement an across-the-board sequestration of mandatory spending programs to offset the cost.

Under the proposed Tax Cuts and Jobs Acts, Congress would be forced to cut $136 billion, including $25 billion from Medicare, in mandatory spending programs next year. The current Medicare 2% limitation under the Budget Control Act (BCA) will be doubled to 4% in this new sequester, resulting in a 6% total cut to reimbursements when stacked on top of the sequester from BCA.  
Additionally, as we wrote about just a few days ago, this legislation still threatens tax-exempt financing that is crucial to our rural hospitals. This tax bill will only harm rural Americans and decrease options and opportunities to receive care.

Our communities in rural America are likely to be one of the populations most harmed by both of these reforms. Rural Americans are older, sicker, and poorer than those living in urban and suburban counties. Rural hospitals, especially Critical Access Hospitals (CAHs) that rely on Medicare payments to keep their doors open, will be at even greater risk of closure. Decreasing Medicare payments to Critical Access Hospitals (CAHs) will push many CAHs to the brink of closing their doors.

We urge our membership to call their Members of Congress to ask for passage of a tax reform bill that will prevent sequestration. NRHA will update the blog with more information as it becomes available. 

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