New York- USA- August 18, 2025
The nonpartisan Congressional Budget Office (CBO) has confirmed that a recently passed Republican budget law will trigger an estimated $500 billion in cuts to Medicare over the next decade. The CBO’s analysis, released on August 15, found that the law’s significant increase to the national deficit will automatically activate the Statutory Pay-As-You-Go (PAYGO) Act of 2010. This act mandates across-the-board spending cuts to certain federal programs when new legislation adds to the deficit, and crucially, Medicare is not exempt.
The CBO’s Findings
The CBO, which provides independent economic analysis to Congress, stated that the Republican law is projected to increase the deficit by trillions of dollars over the next decade. This deficit increase, primarily due to tax cuts for corporations and high-income earners, will trigger a sequestration order from the White House Office of Management and Budget (OMB). This order will impose an automatic 4% reduction in Medicare spending, starting in fiscal year 2026. The cuts will affect a wide range of services, including payments to hospitals, physicians, and other healthcare providers, as well as Medicare Advantage plans.
While previous legislation that added to the deficit, such as the 2017 Tax Cuts and Jobs Act, was prevented from triggering PAYGO cuts by a special provision in the law, Republicans did not include such a provision in the new budget law. Democrats are now using the CBO report to highlight what they call a “backdoor attack” on a program that serves tens of millions of seniors and people with disabilities.
Political Fallout
The CBO’s findings have intensified the political debate over the budget law. House Budget Committee Ranking Member Brendan F. Boyle, a Democrat, released a statement claiming Republicans were aware that the tax cuts would lead to cuts in Medicare. He called the law “reckless, dishonest, and deeply harmful to the middle class.”
Republicans, for their part, have argued that the tax cuts will spur economic growth, which will in turn offset the deficit. They have also pointed to other provisions in the law that provide some funding for rural hospitals. However, the CBO’s analysis shows a different picture, projecting that the new law will disproportionately benefit the wealthiest Americans, while leading to cuts in critical social programs.
What Comes Next?
The looming Medicare cuts have set up a potential legislative crisis. While Congress has historically acted to prevent PAYGO cuts from taking effect, doing so would require bipartisan cooperation, a high hurdle given the current political climate. Democrats have vowed to do everything they can to “head off” the cuts, but they face a tough battle, as a measure to waive the PAYGO rule would require a supermajority in the Senate.
The CBO’s report has put the spotlight on the immediate financial consequences of the new budget law and its potential impact on a cornerstone of the American social safety net.
