The Fiscal Cliff: What Does It Mean for Americans with Mental Illness?

Some call it a fiscal cliff, others call it an obstacle course. Whatever term you choose, our nation is facing an economic crisis.

As part of the government’s budget process, Congress and the White House must agree on revenue and spending by Dec. 31. If they don’t, bad things will happen to the economy affecting the lives of all Americans. The fiscal cliff—and proposals to avoid it—may have a huge impact on children and adults with mental illness.

Congress needs to hear from us now.

What is the problem?

It’s about money: revenue and spending. In addition to the end of tax cuts passed under President George W. Bush, automatic across-the-board reductions in discretionary spending are set to take effect on January 2, 2013 unless the President and Congress agree on a different plan. “Discretionary spending” mainly entails defense and entitlement programs such as Medicare that Congress budgets for every year.

At issue in the current debate is how to shrink the national deficit by $4 trillion dollars over the next 10 years. (The deficit represents the excess of spending over revenue. It contributes to, but is not the same as the national debt).

How did we get to this point?

After a bruising battle in 2011 over the national debt and the deficit, both parties in Congress and the White House agreed to what is called the automatic “sequestration” process.

Sequestration puts enough sacred cows on the auction block to hopefully force agreement on more carefully chosen revenue and spending levels.

What is at risk?

If Congress doesn’t act by Dec. 31, resources that are vital to people living with mental illness will take a hit of more than eight percent. That’s a loss of hundreds of millions of dollars. Here’s the list:

1. Mental health block grants through the Substance Abuse and Mental Health Services Administration (SAMHSA) which allow states to provide safety net and recovery mental health services not covered by Medicaid.
2. Substance abuse prevention and treatment block grants through SAMHSA.  Because Medicaid pays so little for substance abuse services, the block grants play a large role in addiction prevention and treatment.
3. Mental health research at the National Institute of Mental Health (NIMH)
4. Individuals with Disabilities Education Act (IDEA) and special education grants to the states.
5. Supportive housing programs funded through the US Department of Housing and Urban Development (HUD).
6. Criminal Justice diversion grants through the Mentally Ill Offender Treatment and Crime Reduction Act (MIOTCRA).
7. In Medicare there will be cuts to providers, not beneficiaries. Doctors will take a 27 percent rate cut.

What is protected in sequestration?

Medicaid the state/federal partnership that finances health care for low income children, mothers and people with disabilities won’t be affected.  Also protected are cash benefits in Supplemental Security Income (SSI) and Social Security Disability Income (SSDI). Veterans’ services are protected in sequestration and in every alternative plan.

What about tax cuts?

Without going into detail, the tax cuts that have been in place for over 10 years are set to expire when the ball drops on New Years’ Eve. There are proposals in Congress to change national tax policy.

How will the various proposals hit our personal wallets?

Find out by using this tax calculator developed by the Tax Policy Center.

What is the “Grand Bargain”?

By Dec. 31, the White House and Congress may agree to agree. IF there is an agreement the goal would be to add $1.6 trillion in new revenue over 10 years and trim health spending by $340 billion over ten years. In a process known as “budget reconciliation” Congress will need six months to a year to draft legislation to tackle the deficit with revenue increases and long- term savings to entitlement programs.

In addition to bringing in more cash by letting the Bush era tax cuts expire, a bipartisan grand bargain is likely to cut spending by changing Medicare, Medicaid and maybe income entitlements such as SSI and SSDI.

Will those changes hurt people who live with mental illness?

While most members of Congress maintain these changes should not harm the most vulnerable beneficiaries, there is always a danger that an unrealistically high savings target could result in harmful cuts.

What changes are suggested for Medicare?

Here are a few of the main ideas:

1. Starting in 2020 draw a line on Medicare spending. If the limit is exceeded, the President and Congress would be required to cut costs.
2. Cut Medicare payments to hospitals, drug companies and other providers.
3. Raise the eligibility age to 67.
4. Charge higher Medicare premiums to beneficiaries earning more than $214,000 ($428,000 for couples).
5. Tax high end Medigap policies to discourage beneficiaries from overusing health services.

What about Medicaid?

Congress seems less likely to cut Medicaid than other programs, because it serves more than 60 million low-income Americans and promotes economic activity in state economies hit hard by the recession. But it is still a possibility. Some in Congress worry that cuts in federal Medicaid spending might make governors even more reluctant to expand the federal-state program as allowed under the new overall health care law

What are the key “takeaways” for people living with mental illness?

Going over the fiscal cliff would be bad news for programs many individuals and families depend on. In addition, a “grand bargain” that avoids immediate cuts to discretionary spending, would likely have long term effects on entitlement programs such as Medicare, Medicaid and perhaps Social Security Disability Income (SSDI) or Supplemental Security Income (SSI).

Call to Action!

Contact your members of Congress urge them to avoid the across-the-board cuts to discretionary spending. Instead ask them to enact a “balanced” approach taking both revenue and spending into account.  In so doing, protect the most vulnerable by funding research and services that give Americans affected by mental illness the opportunity to recover and contribute to the vitality of their communities.