Senate Finance Committee To Consider Proposed Spending Reductions in Medicaid, Medicare

The Senate Finance Committee on Thursday as part of the fiscal year 2006 budget reconciliation process likely will mark up a proposal that would reduce spending in Medicaid and other programs, and most observers expect committee Chair Chuck Grassley (R-Iowa) to "craft a package that has enough Republican support to clear the committee on a party-line vote," CongressDaily reports (Heil, CongressDaily, 10/17).

Grassley has targeted moderate Sens. Gordon Smith (R-Ore.) and Olympia Snowe (R-Maine) for support with a proposal to divide $12 billion in spending reductions -- $2 billion more than required under the Senate budget resolution -- between Medicaid and Medicare (Schuler/Carey, CQ Today, 10/14). Smith and Snowe, who have opposed Medicaid spending reductions, have indicated that they would support a proposal that would not affect services for beneficiaries.

Senate Finance Committee ranking member Max Baucus (D-Mont.) also has said he would consider Medicaid spending reductions that do not affect services for beneficiaries, but most observers predict that the Grassley proposal will not require support from Democrats to pass in the committee (CongressDaily, 10/17). Grassley has warned Senate Finance Committee members that the Senate Budget Committee could require larger Medicaid spending reductions in the event the finance committee cannot reach an agreement (CongressDaily, 10/14).

Meanwhile, House Energy and Commerce Committee Chair Joe Barton (R-Texas) said that he expects to obtain most of the $14.7 billion in spending reductions required under the House budget resolution from Medicaid. His proposal includes provisions that would revise Medicaid reimbursements for prescription drugs, place additional restrictions on asset transfer rules and increase rebates from pharmaceutical companies -- provisions included in the Grassley proposal.

In addition, the Barton proposal would allow states to increase cost-sharing requirements for Medicaid beneficiaries, a provision that would save an estimated $2 billion over five years, and exclude coverage for certain conditions. The proposal also would establish health savings accounts for Medicaid beneficiaries and would require states to verify the eligibility of Medicaid applicants or risk a loss of federal funding.

According to CQ Today, "even before they start voting, the House and Senate appear headed for a conference fight" over Medicaid and Medicare spending reductions (Schuler/Carey, CQ Today, 10/14). Challenges to an agreement include "a compressed timeline, opposition from Senate moderates and a shuffled House leadership team," CQ Today reports (Dennis, CQ Today, 10/14).

According to the Washington Post, the recent indictment of House Majority Leader Tom DeLay (R-Texas) and his subsequent decision to temporarily relinquish his leadership position have caused an "abrupt shift" in the House and have placed a group of fiscal conservatives called the Republican Study Committee in control. As a result, "cutting the budget -- which only months ago seemed far from possible -- is at the center of the agenda in the House," the Post reports.

However, "Republicans could be taking a big risk by cutting Medicaid programs while their standing in the polls has plummeted and Democrats gear up for a fight," according to the Post (Weisman, Washington Post, 10/17).

NPR's "Morning Edition" on Monday reported on the budget proposals. The segment includes comments from Reps. Marsha Blackburn (R-Tenn.) and Michael Castle (R-Del.); Robert Greenstein, founder and executive director of the Center on Budget and Policy Priorities; and Cara Morris, spokesperson for the Emergency Campaign for America's Priorities (Rovner, "Morning Edition," NPR, 10/17). The complete segment is available online in RealPlayer.