A spending plan that just might put you out of business

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John O'Connor
John O'Connor

Whenever the White House or Congress does something goofy, lobbying groups tend to temper their response.

After all, these are the same leaders who might be needed for help down the road. So why make them angry? At least, that's the conventional view. But when the Trump administration's spending plan for the next fiscal year was released Tuesday, the senior living sector emptied both barrels. Maybe that's because the plan, if enacted, would severely undermine the ability of many operators to remain solvent.

As proposed, the budget would reduce Medicaid spending by $610 billion over the next decade. That's on top of the $800 billion in reductions the House recently approved in a health law replacement package.

“We are concerned about the potential return of across-the-board spending cuts in senior housing and services programs,” LeadingAge said in a release. That reaction was fairly typical.

As we reported yesterday, the budget would cut overall funding for the Department of Housing and Urban Development by more than 15% compared with the funding level enacted for FY 2017.

Funding is “insufficient,” the organization said, to renew the 97,000 Section 202 Housing for the Elderly project rental assistance contracts up for renewal during the year and to renew Section 8 project-based rental assistance contracts, which provide rental subsidies for approximately two-thirds of the Section 202 program's homes. Also under the budget, the National Housing Trust Fund, which provided states with almost $200 million for rental housing in 2016, would be eliminated.

So it's guns versus butter, and guns are now in the lead, right? Not exactly. For it's one thing to emphasize “guns” (military spending) over “butter” (civilian goods). It's quite another to create a spending plan that uses Dark Arts-inspired accounting gimmicks to get the job done. For by any reasonable standard, the budget's assumptions are far-fetched at best.

To erase the $1.3 trillion deficit projected a decade from now, the proposal predicts that $300 billion of the savings will come from a 40% cut in non-military discretionary spending. Another $100 billion would come from timing shifts, a generous estimate for trimming waste, fraud and abuse. Those required developments are long shots at best. But they are a sure bet when compared with the biggest farce of them all in the budget: aggressive growth assumptions of 4%, a full percentage point ahead of what the Congressional Budget Office predicts. That's double the annual rate we've seen so far this century. And with 10,000 baby boomers retiring every day, the challenges will only exacerbate.

To recap, operators are facing a budget plan that has virtually no chance of accomplishing its goal, with the added bonus of an existential threat. Seems like an odd roadmap from a White House that promised to be pro-business.

John O'Connor is editorial director of McKnight's Senior Living. Email him at john.oconnor@mcknights.com.

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