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Payroll, unemployment deal includes cuts

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Congressional negotiators are trying to put the final touches on a broad package that would include the extension of a payroll tax holiday and unemployment benefits. It also would avoid a 27 percent drop in Medicare payments to doctors. However, the final hang-up has been identifying spending cuts to offset the size of a package that could exceed $150 billion.

This final hurdle came after Republicans agreed to the 10-month extension of the payroll holiday — which maintains the current 4.2 percent withholding tax as opposed to the normal 6.2 percent — without having any offsetting cuts to make up for the estimated $100 billion hit to the Treasury.

Still, Sen. Max Baucus (D-Mont.) and Rep. David Camp (R-Mich.) are struggling to find the right mix of about $50 billion in “pay-fors,” as they are known on Capitol Hill. Here are the options under consideration:

Unemployment insurance extension

* Auction of public spectrum for satellite communication: This has been a rare area of bipartisan agreement in the past year as a way to raise federal revenue. The concept has been supported because it would raise money and give telecommunication companies access to better lanes. Under one estimate, the federal government would raise at least $13 billion through a spectrum auction. Baucus and Camp are still sorting out how to devote some of that spectrum to emergency first responders, so that local and federal agencies could communicate on the same frequency during disasters. If the federal government paid to maintain those frequencies, less money would be raised and negotiators would need to find more offsets for the extended unemployment benefits.

* Federal pension contributions: Federal employees would have to contribute more money to their pensions, a move that could raise at least $15 billion. (A House GOP plan, which mandated a 1.5 percent increase in pension contributions, would raise an additional $43 billion.) One of the options under discussion is a phase-in of the contribution increase over three years for existing workers while new federal workers would pay the full increase immediately.

* Fannie/Freddie fees: As part of a temporary extension plan approved in December, Congress imposed new fees on mortgages guaranteed by Fannie Mae and Freddie Mac. Any shortfall from the spectrum auction probably would be made up by more fees from the two mortgage giants.

Medicare payment plan

* Prevention: The prevention fund that is designed to help primary-care doctors prevent illness would be cut. The fund, established with $15 billion over 10 years, was targeted for a $4 billion reduction in Obama’s budget proposal for fiscal 2013. Negotiators are looking to bank those savings now, possibly $5 billion or more.

* Louisiana cut: Reduction in extra Medicaid payments to Louisiana that began after Hurricane Katrina. Some reports suggest $2.5 billion in savings.

* Bad debt and clinical payments: Nearly $10 billion in savings would come from reduced payments to hospitals and nursing homes. These would come through reduced payments from Medicare for laboratory services and payments to providers to cover patients who do not fully pay for their care.

* DSH: Medicare makes payments to disproportionate-share hospitals (DSH), those that treat a disproportionate share of patients who cannot pay for their services, but this proposal would reduce those payments by about $4 billion.

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