Are you prepared to navigate your way through the new budget landscape?

The recently enacted Budget Control Act of 2011, which permitted the United States to raise its debt ceiling, includes complex new mechanisms to control spending and reduce the federal deficit. These new mechanisms are setting off a flurry of activity in Washington, activity that will impact every sector of the economy, especially the health and life sciences sector, this year and in years to come.

Raise the Roof: When are spending cuts potentially spending increases?

With fiscal year 2011 ending in less than two months, Congress must now complete the FY 2012 appropriations process with a new set of spending limits. Interestingly, the new spending cap for FY 2012 contained in the Budget Control Act is $24 billion higher than the cap that was used by the House to prepare its current spending bills. We anticipate that the final spending levels will be significantly higher than the current House numbers, given that the Senate will likely press for the higher funding levels of the Budget Control Act.

Caps and Ceilings: Where will spending go in the future?

In addition, the legislation establishes a newly appointed Congressional "super committee" tasked with achieving at least $1.5 trillion in deficit reduction. The make-up of the committee, which includes party leadership and former members of the National Commission on Fiscal Responsibility and Reform , is already fueling speculation about the outcome of this joint committee process. That committee will have less than three months to do its work and send recommendations to the House and Senate for a vote in late December. If Congress fails to reach an agreement, automatic cuts totaling $1.2 trillion for all non-exempt discretionary and mandatory spending programs will take effect.

Depending on the mechanism used, health-care related cuts are expected to impact a range of Medicare and Medicaid providers, including hospitals, physicians, pharmacies, and medical technology and pharmaceutical companies most significantly. Research funding at NIH and regulatory activities at FDA may also be impacted substantially, impacting academic health centers, voluntary health associations, researchers and manufacturers.

Opportunities and Threats

Health care clients of all types want to understand thoroughly this complex and fast-moving process and consider how to influence it within a very short time frame.