Sequestration and its Effects on Special Populations


On March 1, 2013, the Office of Management and Budget (OMB will sequester approximately $85 billion in Fiscal Year 2013 spending as mandated by the Budget Control Act (BCA) of 2011.

OMB recently calculated that sequestration will require an annual reduction of roughly 5 percent for nondefense programs and roughly 8 percent for defense programs. However, given that these cuts must be achieved over only seven months instead of 12, the effective percentage reductions will be approximately 9 percent for nondefense programs and 13 percent for defense programs. These large and arbitrary cuts will have severe impacts across the government.

This overview on sequestration and its effects on special populations includes information related to: Medicaid, Social Security, and CHIP programs; Medicare; the Substance Abuse and Mental Health Services Administration (SAMHSA); Education and Special education (IDEA); the Head Start Program; and Housing.

National Implications

Medicaid, Social Security, and CHIP: While Medicaid, Social Security, and the State Children’s Health Insurance Program (CHIP) are exempt from the talks, most other health programs will be affected.

While Social Security payments are not affected, sequestration would force the Social Security Administration (SSA) to furlough most of their workforce, causing SSA offices to close earlier or permanently. Beneficiaries who visit these offices or call the 1-800 number will most likely have to wait longer for services. The furlough would also impact the ability of disability claims, retirement claims, and disability hearings to be processed.

Medicare: The sequester includes a two percent cut to Medicare, as well as much larger cuts to federal healthcare agencies. The Medicare cut is big — $11 billion just this year, according to the White House budget office. These cuts will affect those who receive Medicare, including Dual Eligible’s (those who receive both Medicare and Medicaid).

This would also result in billions of dollars in lost revenues to Medicare doctors, hospitals, and other providers, who will only be reimbursed at 98 cents on the dollar for their services to Medicare beneficiaries.

Substance Abuse and Mental Health Services Administration (SAMHSA): Sequestration would reduce access to behavioral healthcare. If sequestration takes effect, up to 373,000 seriously mentally ill adults and seriously emotionally disturbed children could go untreated. This would likely lead to increased hospitalizations, involvement in the criminal justice system, and homelessness for these individuals.

In addition, close to 8,900 homeless persons with serious mental illness would not get outreach, treatment, housing, and support they need through the Projects for Assistance in Transition from Homelessness (PATH) program. Admissions to inpatient facilities for people in need of critical addiction services could be reduced by 109,000, and almost 91,000 fewer people could receive substance abuse treatment services.

Education and Special education (IDEA):

Title I: Title I education funds would be eliminated for more than 2,700 schools, cutting support for nearly 1.2 million disadvantaged students. This funding reduction would put the jobs of approximately 10,000 teachers and aides at risk. Students would lose access to individual instruction, afterschool programs, and other interventions that help close achievement gaps.

Special Education (IDEA): Cuts to special education funding would eliminate Federal support for more than 7,200 teachers, aides, and other staff who provide essential instruction and support to preschool and school-aged students with disabilities.

Head Start: Head Start and Early Head Start services would be eliminated for approximately 70,000 children, reducing access to critical early education. Community and faith based organizations, small businesses, local governments, and school systems would have to lay off over 14,000 teachers, teacher assistants, and other staff.

U.S. Department of Housing and Urban Development (HUD): Under sequestration, HUD would not renew about 125,000 Tenant Based Rental Assistance vouchers (Section 8). This would affect over 300,000 individuals across the country. Half of Section 8 households have children, 40 percent are disabled, and 20 percent are elderly.