Medicare faces $491 billion cut under ‘Big Beautiful Bill’: CBO

Modern Healthcare – Monday, August 18, 2025
By Michael McAuliff

Unless Congress acts, Medicare will face $491 billion in automatic cuts over the next 10 years to counter deficit spending in President Donald Trump’s “One Big Beautiful” tax-cut law, according to the Congressional Budget Office.

Deficit projections from the sweeping measure have swelled to $3.4 trillion over the next decade since Congress’ nonpartisan budget analysts warned in May an earlier version of the bill would set up Medicare cuts. The law, which Trump signed in July, is set to trigger sequestration cuts under what is known as the Statutory Pay-as-You-Go Act of 2010, or PAYGO.

The cuts would start at $45 billion in 2026 and rise to $76 billion in 2034, for a total of $491 billion, the CBO estimated in a letter released Friday to ranking Democrats on the House and Senate budget committees, Sen. Jeff Merkley (D-Ore.) and Rep. Brendan Boyle (D-Pa.), as well as Senate Finance Committee ranking Democrat Ron Wyden and Sen. Sheldon Whitehouse (D-R.I.).

Under PAYGO, if new legislation adds to the deficit, the White House’s Office of Management and Budget must carry out offsetting sequestration cuts.

Congress exempted Social Security and some programs for low-income Americans from sequestration. But the law set Medicare cuts at 4% — in part to dissuade lawmakers from passing deficit-busting bills.

Congress has passed laws in the past to let themselves off the hook, erasing PAYGO cuts tied to Trump’s Tax Cuts and Jobs Act of 2017 and former President Joe Biden’s American Rescue Plan Act of 2021.

Generally, the minority party has gone along with waiving the rules to avoid cutting Medicare.

Democrats’ intentions this time remain unclear. None of them voted for the GOP tax cut bill that will cause the Medicare cuts, and voters back home roundly criticized Democratic senators in the spring for going along with a GOP spending bill that prevented a government shutdown. Their course may depend on constituents’ reactions when they become more aware of the pending Medicare cuts.

While House Republicans could pass a waiver on their own, at least seven Democrats would have to assist the GOP in the Senate, where 60 votes would be required, and Republicans hold a 53-47 seat majority.

Republicans, who would have to take the lead on any waivers, did not have a plan for dealing with the sequestration cuts when asked before the recess.

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