Senate Approves Tax Cut Legislation, Including $10B in Medicaid Funds for States, $25B in Medicare Money for Rural Areas

The Senate on May 15 voted 51-49 to approve a 10-year, $350 billion tax cut package that includes funding for both Medicaid and Medicare, the New York Times reports (Rosenbaum, New York Times, 5/16). The Senate voted 95-3 in favor of a $20 billion amendment proposed by Sen. Susan Collins (R-Maine) that would use $10 billion to increase federal matching rates for Medicaid by 2.95 percentage points until Oct. 1, 2004, the CongressDaily reports. The other $10 billion would be evenly divided over two years to be used by states for health care, social services, public safety, education, job training, transportation and infrastructure, law enforcement or other "essential government" services (Rovner, CongressDaily, 5/15). To help offset the cost of the Medicaid funding increase, the Senate increased user fees and closed existing tax breaks, the Washington Times reports (Dinan, Washington Times, 5/16). The Senate also voted 86-12 to approve a 10-year, $25 billion amendment proposed by Senate Finance Committee Chair Charles Grassley (R-Iowa) that would increase Medicare payments to doctors and hospitals in rural areas, the AP/Minneapolis Star Tribune reports (AP/Minneapolis Star Tribune, 5/16). To help offset the costs of the increased Medicare reimbursements, the amendment calls for reduced Medicare payments for medical devices and chemotherapy drugs, as well as for adding deductibles and copayments for laboratory services, the Wall Street Journal reports (Murray, Wall Street Journal, 5/16).

House-Senate Compromise
The House's $550 billion version of the tax cut does not include the Medicaid or Medicare amendments, and a House-Senate conference committee will begin next week to resolve the differences between the two bills, the New York Times reports (New York Times, 5/16). The negotiations between the House and Senate could last through June, according to the Washington Post. Whatever shape the final tax cut takes, it could have a "major impact" on the 2004 presidential election because several Democratic candidates have proposed freezing future tax cuts that were approved in 2001 and using the savings to fund programs such as expanded health insurance coverage, the Post reports. If the tax cuts are put into effect, Democratic candidates could have to campaign on raising taxes or find money for their proposals elsewhere, according to the Post (Weisman, Washington Post, 5/16).