Budget Conference Committee Members Agree To Cut at Least $8.6B From Medicaid Next Year

Members of the conference committee reconciling the House and Senate versions of the fiscal year 2006 federal budget have agreed to a draft plan that calls for $40.5 billion in savings over five years "from a broad range of benefit programs," including Medicaid, the Wall Street Journal reports. According to the Journal, the budget draft "represents the most-significant effort by lawmakers since the late 1990s to address the growing costs of government-benefit programs." Medicaid "is the most-sensitive single piece" of the budget, the Journal reports (Rogers, Wall Street Journal, 4/28).

Specific Medicaid Reductions
Budget negotiators apparently have "agreed to follow a recommendation by the nation's governors" and reduce Medicaid spending by at least $8.6 billion next year, the Washington Times reports (DeBose, Washington Times, 4/28). The Journal reports that the budget draft calls for "about $10 billion" in Medicaid spending reductions (Wall Street Journal, 4/28). House Budget Committee Chair Jim Nussle (R-Iowa) said, "The governors have come forward with about $8 billion worth of savings that can be achieved this year" (Washington Times, 4/28). A memo distributed by Nussle included $5.2 billion in savings from altering the way pharmacies are reimbursed for drugs, $1.4 billion by restricting the transfer of assets to qualify for Medicaid and $2 billion by allowing states to charge higher copayments for some services (Cohn/Rovner, CongressDaily, 4/28).

Budget Background
President Bush's fiscal year 2006 budget proposal suggested revisions to Medicaid that he estimated would save $60 billion over 10 years and $14 billion over five years (Kaiser Daily Health Policy Report, 3/18).
The House approved a budget resolution with Medicaid savings of $15 billion to $20 billion. The Senate version of the budget included no cuts to Medicaid, after senators approved an amendment to eliminate $14 billion in proposed cuts. Media reports on Wednesday indicated that Sen. Gordon Smith (R-Ore.), who sponsored the amendment, and the Bush administration had reached a deal on the Medicaid cuts, agreeing to create a commission that would study Medicaid and suggest ways to reduce spending by about $10 billion (Kaiser Daily Health Policy Report, 4/27).

Smith Rejects Deal
However, Smith on Wednesday rejected a proposal by the Republican congressional leadership that would instruct the Senate Finance Committee to find $16 billion in cuts from programs within its jurisdiction, including at least $10 billion in cuts to Medicaid, CongressDaily reports. According to people with knowledge of the negotiations, Smith said he only would accept up to $10 billion in savings from all programs overseen by the Senate Finance Committee. Further, Smith reportedly was concerned that the $6 billion in additional cuts was not specified and could come from Medicaid, CongressDaily reports. The sources added that Smith felt that the proposed commission to study Medicaid was insufficient (CongressDaily, 4/28). Under the proposal, cuts to Medicaid would be delayed until September, when a commission appointed by the White House to study the program would release its findings. The commission was included in the plan "to win the votes of several Senate GOP moderates," including Smith, CQ HealthBeat reports (CQ HealthBeat, 4/27).

Governors' Take
Some governors said they disagree with Nussle's claims that they have consented to $8.6 billion in cuts, CongressDaily reports. Michigan Gov. Jennifer Granholm's (D) Washington office in an e-mail to the state's congressional delegation said, "The governors have not yet agreed on any Medicaid reforms. In fact, the only position that the governors have agreed to is that there should be no Medicaid cuts." People involved in a working group of governors said the proposal distributed by Nussle came from a preliminary document from the National Governors Association. They added that the document was "so preliminary that the first round of comments are not even due until this Friday," CongressDaily reports. A spokesperson for Nussle said the numbers cited in the memo came from NGA Chair and Virginia Gov. Mark Warner (D).

Timeline
Congressional aides "said a deal was still possible that would allow negotiators to file a conference report for consideration in the House as early as" Thursday, CongressDaily reports. The Senate could consider the budget proposal on Friday, before both chambers adjourn for a one-week recess (CongressDaily, 4/28). Senate Budget Committee Chair Judd Gregg (R-N.H.) said, "This is a long march, and this is about three or four steps on the right road" (Wall Street Journal, 4/28). House Majority Whip Roy Blount (R-Mo.) said, "We are very hopeful we'll get it (on the floor)" on Thursday (CQ HealthBeat, 4/27).

Washington Post Editorial
"Reining in entitlements is critical, and it isn't going to be accomplished painlessly for any [Medicaid] beneficiaries," a Washington Post editorial states. "But Congress should inflict the pain first on those who can tolerate it best, not least," the editorial says, adding that Congress "seems to be starting with the most vulnerable, while sparing those with the resources (and lobbyists) to squawk." The editorial states that an analysis by the Urban Institute-Brookings Institution Tax Policy Center found that three-fourths of the benefits from $70 billion in proposed tax cuts included in the budget "would go to the richest 3% of Americans." While a budget in "theory ... could be a good thing," the country is "better off without" the proposed budget, the editorial says (Washington Post, 4/28).

Broadcast Coverage
KCRW's "To The Point" on Wednesday included a discussion of Medicaid costs and state and federal funding for the program. Guests on the show included Michael Cannon, director of health policy studies at the Cato Institute; Michael Koetting, vice president of planning for University of Chicago Hospitals and faculty member in the university's Department of Health Studies; Larry Lavin, director of the National Health Law Program, a health advocacy organization for low-income U.S. residents specializing in Medicaid law and policy; Barbara Lyons, deputy director of the Kaiser Commission on Medicaid and the Uninsured; and Tim McBride, professor of health management and policy at the University of Missouri-St. Louis (Olney, "To The Point," KCRW, 4/27).

The complete segment is available online in RealPlayer.