Without a legislative solution from warring political parties in Congress and the White House, the US is in danger of breaching its debt limit, which would have serious repercussions for the long-term care sector, advocates and experts warned. 

The debt ceiling was created in 1917 as a way to manage the federal government’s spending. The current cap of allowable debt sits at $31.4 trillion, and the country hit that limit on Jan. 19. Since then, the US Treasury has been taking “extraordinary measures” — as the government and observers call it — to keep the federal financial system running. That system includes Medicaid payments that are sent to states for distribution, as well as Medicare payments. 

If the US defaults on its debt, which it has never done, those payments would halt, at least temporarily. Even a short-term cessation could be “catastrophic,” said Katie Smith Sloan, president and CEO of LeadingAge, in an email to McKnight’s Long-Term Care News on Friday.  

“The exact scope and timing of the implications of the US defaulting in its debt is not immediately clear,” Sloan said in an email statement. “However, should a default result in even just a few days of lagging payments, the impact on providers could potentially be catastrophic and reduce even further older Americans and their families’ ability to access care.”

Despite the potential fallout, a statement from the largest US nursing home association, the American Health Care Association, noted that the group “remain[s] optimistic that policymakers will come to a solution.”

“With the long-term care industry already experiencing a historic workforce crisis and recovering from the pandemic, any disruption of lifeline reimbursements will result in devastating consequences for our nation’s most vulnerable individuals who need access to care,” the statement said.

Over the last decade, the US has creeped close to default before, but Congress has always intervened to raise the ceiling, albeit using that looming default to exact political concessions. As serious as the financial situation is, political dealmaking always has played a role. 

The Biden administration “would have some discretion about what to fund and what not to fund,” according to several experts interviewed by Axios, a Washington, DC-focused news organization. 

“They’ll pursue the Washington Monument strategy, which is, you know, we’re going to shut down the most highly visible, highly valued stuff first, and we’re going to tell you that’s what we’re going to do and piss people off,” Michael Cannon, health policy studies director at the Cato Institute, told the website. 

Payroll taxes could sustain Medicare “for a bit,” said Joseph Antos, a healthcare scholar at the American Enterprise Institute. Bill Hoagland, a former US Senate Budget Committee staff director, said that Medicaid remains a “big uncertainty” since it’s not sure “how states would reimburse providers without getting their federal … matching funds.”

Treasury’s “extraordinary measures” are expected to last until early June. The Republican-run US House passed legislation on party lines suspending the debt limit until March 31, 2024, or by $1.5 trillion — whichever comes first — but the bill is not expected to go anywhere in the US Senate, which is led by Democrats.

While political brinkmanship has become the norm for Congress and the White House, LTC-sector advocates are sounding the alarm over the real-world consequences. 

“With the workforce crisis, inflation and the longstanding underfunding of long-term services and supports, too many of our nonprofit mission driven members are already reducing services or even closing,” Smith Sloan said. “They simply cannot withstand another financial blow.”