Trump tax law could trigger about $500B in Medicare cuts over decade without fix: CBO

Recent analysis from the Congressional Budget Office estimated that Medicare spending would see steep cuts over roughly the next decade absent congressional action, following passage of President Trump’s major tax law last month. 

The nonpartisan budget scorekeeper crunched the numbers of potential across-the-board cuts that federal programs could see under the Statutory Pay‑As‑You‑Go Act of 2010 as a result of the enactment of Trump’s sweeping tax and spending bill — which it estimates could cost trillions of dollars over the next 10 years.

The 2010 law, enacted under the Obama administration, seeks to require Congress to ensure new legislation is budget-neutral and can be enforced with the threat of automatic cuts, also known as “sequestration,” to counter excess costs.

But Congress has often enacted legislation over the years to avoid those cuts under both Republican and Democratic administrations. The CBO noted in a June letter that sequestration has never been triggered under the law since its enactment in 2010.

However, in its analysis, conducted at the request of Democrats, the CBO estimated the Office of Management and Budget (OMB) would be required to issue a “sequestration order not more than 14 days after the end of the current session of Congress” to cut fiscal 2026 spending by $415 billion, if Congress does not act.

The office estimated reductions in Medicare spending would be limited to about $45 billion for fiscal 2026 under the 2010 law, leaving “$370 billion to be sequestered from the federal budget’s remaining direct spending accounts in that year.”

The CBO also noted the law exempts large accounts that fund programs like Social Security, while further estimating the OMB would “have roughly $120 billion in budgetary resources available for cancellation in 2026 — less than the remaining amount that would be required to be sequestered.”

The CBO’s analysis included a closer breakdown of how Medicare spending would fare under such circumstances.

“The 4 percent maximum reduction in Medicare spending would continue to apply to sequestration orders for years after 2026,” it said. “If OMB ordered a sequestration of $415 billion for each year through 2029 and $339 billion each year from 2030 through 2034, the ordered reductions in Medicare spending would increase to $76 billion in 2034 and would total $491 billion over the 2027–2034 period.”

When factoring in fiscal 2026, the estimated spending reductions in store for Medicare would total more than $500 billion.

“After accounting for the reduction in Medicare spending, the required reduction in spending for other programs would exceed the estimated amount of resources available to those programs in each year over the 2027–2034 period,” the CBO said. 

It added that, if the OMB “sequestered all of the funding for those programs, the total amounts would be less than the reductions required by” the 2010 law.

The Hill has reached out to the OMB for comment.

The CBO has estimated Trump's major tax package will add nearly $3.4 trillion to the nation’s deficits over roughly the next decade, not factoring in macroeconomic and debt-service effects. However, Republicans have largely downplayed the cost of the tax cuts and argue the overall plan will help boost the economy.