House Approves $20B in State Aid as Part of Compromise Tax Cut Bill; Senate Expected To Follow Suit

The House early on May 23 voted 231-200 to approve a 10-year, $350 billion compromise tax cut bill (HR 2) that includes state funding for Medicaid, the AP/Las Vegas Sun reports. Under the bill, states would receive $20 billion in federal aid, half of which would go to Medicaid (AP/Las Vegas Sun, 5/23). According to a House aide, the state aid package essentially is a provision proposed by Sen. Susan Collins (R-Maine) and approved as part of the tax cut bill that the Senate passed last week (Fulton/Vaughan, CongressDaily, 5/22). Collins' amendment calls for states to receive $20 billion in additional aid, $10 billion of which would be used to increase federal matching rates for Medicaid by 2.95 percentage points until Oct. 1, 2004. 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 (Kaiser Daily Health Policy Report, 5/16). The difference between Collins' amendment and the House tax cut bill is that the latter contains a provision that would designate the way non-Medicaid funds would be distributed to localities, according to CongressDaily (CongressDaily, 5/22). The House and Senate earlier had passed different versions of the tax cut bill; the House version did not include the state funds (Kaiser Daily Health Policy Report, 5/16). The Wall Street Journal reports House Republicans were "reluctan[t]" to include the $20 billion state-aid package. House GOP leaders yesterday stalled the tax cut bill until Senate Republican leaders promised in writing that the state funds would expire in 18 months (Murray, Wall Street Journal, 5/23). The bill now goes to the Senate, "which seemed certain" to pass it, the AP/Sun reports (AP/Las Vegas Sun, 5/23). Senate Majority Leader Bill Frist (R-Tenn.) said he expects a full Senate vote on the tax cut bill as early as May 23 (Rovner/Vaughan, CongressDaily/AM, 5/23).

Medicare Money
The compromise bill approved by the House does not include an amendment that would have increased Medicare reimbursements to rural hospitals, the AP/Nando Times reports. The $25 billion amendment, sponsored by Senate Finance Committee Chair Charles Grassley (R-Iowa), was approved 86-12 by the Senate last week (Sullivan, AP/Nando Times, 5/22). However, the amendment was stripped from the compromise tax cut bill after House Ways and Means Committee Chair Bill Thomas (R-Calif.) expressed opposition, and the Bush administration "did not insist" that the amendment be included, the Des Moines Register reports (Norman, Des Moines Register, 5/23). Medicare reimbursement rates to hospitals, which were last set in the early 1980s, were set lower for rural hospitals under the belief that it cost less to treat people in rural areas, but many lawmakers and health officials argue that the reimbursement scale is no longer fair because "hospitals everywhere compete for the same staff and pay the same for high-tech equipment," the AP/Times reports. Although Congress equalized Medicare reimbursements to hospitals for 2003, the Senate amendment would make the reimbursement fix permanent and would increase payments to health providers (AP/Nando Times, 5/22). In a letter to Grassley, who agreed to drop the amendment from the tax cut bill, President Bush said, "I will support the increased Medicare funding for rural providers contained in your amendment as part of a bill that implements our shared goal for Medicare reform" (Letter text, 5/22).