The Balanced Budget Act of 1997

In 1997, as concerns continued to mount over the size of the federal budget deficit, Congress and President Bill Clinton reached agreement on a piece of legislation designed to balance the nation's books by 2002. The Balanced Budget Act of 1997 was designed to cut more than $100 billion from the federal budget, mostly by slowing the growth of Medicare, the nation's health care program for the elderly.

Size

• The Balanced Budget Act of 1997 planned to produce $160 billion in savings between 1998 and 2002, offset by $33 billion in additional savings, for a planned net deficit reduction of $127 billion.

Planned Savings

• A summary of the Balanced Budget Act of 1997 by the Congressional Budget Office reported that the law projected $112 billion in savings from slowing projected spending increases in Medicare. In addition, the act called for $7 billion in savings from changes to Medicaid, a federal health care program for the poor; $15 billion in savings from other cuts in government spending; and $26 billion in new revenues.

Additional Spending

• The Balanced Budget Act of 1997 was not limited to spending cuts and revenue increases. The act also called for $20 billion in spending on children's health insurance and $13 billion in spending to offset the effects of the welfare reform law, which Clinton signed in 1996.

Effects

• Studies of the Balanced Budget Act of 1997's effects have focused mainly on Medicare, the program expected to produce most of the savings. A 2000 report by the Medicare Payment Advisory Commission (MedPAC) reported that Medicare spending that year had increased only 3.5 percent, well below the projected 5.5 percent. This raised concern among health care providers that the Balanced Budget Act may have limited Medicare beneficiaries' access to quality health care. In addition, health care providers that accept Medicare patients complained that the law unfairly burdened them, the report stated.