Sequestration – Which Organizations Are Exempt?

Summary: Which organizations are exempt from the sequestration?

What does it mean?

The official definition in terms of the budget is a US legal procedure in which automatic spending cuts are triggered. In a nutshell, effective March 1, 2013, the government spending cuts go into effect in an effort to try to reduce the federal deficit which now is over $16 trillion. For 2013, the amount of spending cuts is estimated to be about $85 million, with additional cuts through 2021 for a total of about $1.2 trillion. These cuts are split evenly between defense and non-defense.

What organizations are exempt from sequestration?

1. Members of congress won’t see any decreases to their salaries. How does an across-the-board spending cut not affect the pay of Congress while it does affect the pay of many other government employees? This is similar to Congress being exempt from the health insurance exchanges. They have their own plan and won’t be subject to the effects of the healthcare exchanges. So much for lead by example. Why are there different rules for Congress?
2. Active duty members of the military – I am so glad this group is exempt. We can’t cut back on any benefits active military members are receiving.
3. Programs at the Department of Veterans Affairs and several public aid funds designed to help those who are most needy – I agree with this one also. We can’t reduce benefits for those who are struggling the most and who can barely afford the benefits they are receiving.
4. More than a dozen oversight boards, commissions and agencies funded outside the normal appropriations process like the US Postal Service – agencies such as these receive outside funding which was one of the criteria in determining exempt or non-exempt.
5. Other agencies, like the Peace Corps or Nuclear Regulatory Commission, might see reductions but their employees won’t be furloughed.
6. Pell grants – pell grants are awarded for education generally for those who have not yet earned a baccalaureate or other professional fee. These are federal funds awarded which do not have to be paid back. It is nice to see at least some form of educational funding not
   

   Which Organizations Are Exempt

   reduced.

7. Food stamps – I agree with this one also. We can’t reduce benefits for those who are struggling the most and who can barely afford the benefits they are receiving.
8. Payments to states for child support enforcement
9. Medicaid won’t be cut directly. That being said, some states tie Medicaid to Medicare indices and could therefore be indirectly affected.
10. Social Security – this would be difficult to cut as many Americans are living off Social Security only due to many economic factors
11. Children’s Health Insurance Program (CHIP) – this program provides funding to families who are above the income level for Medicaid but who cannot afford insurance for their children. This exemption goes hand in hand with the Medicaid exemption.
12. Revolving capital funds and retirement benefit funds that allow the government to continue to make pension payment obligations
13. Energy department bureaus that oversee regional hydroelectric power distribution
14. Federally controlled insurance programs like the Federal Crop Insurance Corporation and the National Flood Insurance Fund
15. Bureau of Land Management’s Helium Fund – not sure why this one is exempt – doesn’t seem to fit with the rest of the list above

So, the definition of sequestration is cross-the-board cuts, but as with any legislation, there are always exemptions or exceptions to the rule. Most of the exemptions are warranted, EXCEPT of course the exemption for Congress’ pay.  They make the rules but the rules don’t apply to them.

Have you had your healthcare financial analysis lately? Do you want to avoid having to initiate a sequestration within your organization? If you need assistance, please reach out to your healthcare financial consultants. Our team of experts can perform a review of your organization and make recommendations which can positively affect your ROI and your bottom line.

BHM Healthcare Solutions, a healthcare management consulting firm.

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