Business Beat
10:10 am
Thu February 28, 2013

How sequestration leads to cuts in research, Medicare

Credit Andrew Magill
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Coming up we’ll tackle sequestration which is set to occur March 1. But first, when a large group of farmers in the Southeast banded together to sue a powerful dairy cooperative a few years ago, many hoped that the case would bring big changes to the industry. But as Peggy Lowe of Harvest Public Media reports, the recent settlement of the case involving Kansas City-based Dairy Farmers of America has resulted in some money for small farmers in the short term but little long-term reform.

Sequestration, or the automatic across-the-board funding cuts set to kick in nationwide March 1, will tally nearly $110 billion in cuts over the next nine years. The cuts are meant to alleviate the trillion dollar deficit.  If Congress does not act to stop the sequester from happening, millions of dollars are at stake for the University of Missouri System.

Indeed, sequestration will cut 8.4 percent of funding for non-defense discretionary programs starting next year. That means the University of Missouri System is at risk of losing more than $25 million of federal funding, according to a report from the system’s Government Relations Office. The cuts would take chunks out of funds for student aid and Medicare, and the biggest slice would come out of university research.

Back in December when sequestration still was scheduled to occur in January, I talked with Rob Duncan the vice chancellor for research on MU’s Columbia campus. He said about $17 million of federally supported research sits on the chopping block at the Columbia flagship alone. That’s about 10 percent of the university’s federal funding for research.  The whole University of Missouri System stands to lose about $23 million in research funding.

“It’s a lot," he said. "It’s substantial. It’s not certain what exactly that impact would be because a lot of it would depend upon how the agencies that fund us from the federal government decide to make up that reduction in their budget.”

Many university researchers receive federal grants for their projects through agencies such as the National Institutes of Health, the National Science Foundation and the Department of Energy. Should sequestration happen, these agencies will most likely not receive the same amount of federal money they have been collecting in the past. In turn, the agencies may be forced to limit the number of research grants awarded, cap the price tag on those grants or even halt funding certain research projects all together.

Duncan said other funding opportunities are available, though.

“Fortunately in many cases, there will be opportunities to shift to other funding modalities other than the federal," he said. "But that’s a problematic argument in the sense that as the federal investment slows down, ultimately all investment slows down. So it’s something that if it occurs, we’ll definitely have to adapt to.”

Another looming cut would be a $750,000 reduction in student aid grants for programs like work-study.

And Medicare payments are at risk too, but cuts are capped at 2 percent because the government considers it an entitlement program. Now, 2 percent might not sound like much, but as KBIA’s Harum Helmy reports, it’s the rural hospitals and their surrounding communities that would feel much of the pinch.

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