Congress Approves FY 2006 Budget Resolution, Including $10B in Medicaid Cuts; Agreement Includes Medicaid Commission

Congress on Thursday approved a $10 billion reduction in Medicaid funding over five years as part of a $2.6 trillion fiscal year 2006 budget resolution, the Washington Times reports. As a result of the negotiations over the budget, the federal government will grant Sen. Gordon Smith's (R-Ore.) request to create a bipartisan commission that would "find ways to eliminate fraud and abuse in the state-reimbursement component of Medicaid," the Washington Times reports. Commission members would be appointed by President Bush, according to the Washington Times. The House voted 214-211 to approve the budget, which would essentially freeze domestic spending at $391 billion. Several hours later, the Senate passed the budget 52-47 (DeBose, Washington Times, 4/29). Although the budget resolution is nonbinding, it sets "critical guidelines" for Congress, as it makes spending decisions for FY 2006, which begins Oct. 1 (Abrams, AP/Las Vegas Sun, 4/28). The FY 2006 budget would reduce by $35 billion spending growth of entitlement programs, including Medicaid, farm subsidies and a federal pensions guarantee, making it the first budget since 1997 that would reduce entitlement spending (Gay Stolberg, New York Times, 4/29). The budget also includes up to $106 billion in new tax cuts over five years (Washington Times, 4/29).

Budget Background
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. The House previously 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 (Kaiser Daily Health Policy Report, 4/28).

$5.9B Dropped for Moderate GOP Vote
Negotiators working to reconcile the two chambers' budget resolutions on Thursday "were forced" to drop $5.9 billion in undesignated cuts to programs within the Senate Finance Committee's jurisdiction, which oversees Medicaid appropriations, in order to "placate a handful of Senate GOP moderates," the Washington Post reports (Weisman, Washington Post, 4/29). 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 finance committee. Further, Smith reportedly was concerned that the $5.9 billion in additional cuts were not specified and could come from Medicaid. The sources added that Smith felt that the proposed commission to study Medicaid was insufficient (Kaiser Daily Health Policy Report, 4/28). Smith on Thursday said, "It was made clear to me that a minimum of $10 billion (in Medicaid savings) was necessary to get a budget." Smith added, "I would have preferred $5 billion, but it is important to remember that a budget is just a number" (Washington Times, 4/29).

Specific Medicaid Details
House Budget Committee Chair Jim Nussle (R-Iowa) earlier this week distributed a memo he received from Virginia Gov. Mark Warner (D), chair of the National Governors Association, that includes proposals for $5.2 billion in Medicaid 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. Nussle said, "The governors have come forward with about $8 billion worth of savings that can be achieved this year" (Kaiser Daily Health Policy Report, 4/28). However, Republican staffers on Thursday said Medicaid cuts would not begin until 2007, after the Medicaid commission has delivered its final report in December 2006. The commission will deliver an interim report to Congress by Sept. 1, according to CQ HealthBeat
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Senate Finance Committee Outlook
It is too early to know "whether there are enough votes" in the finance committee to cut $10 billion from Medicaid, according to Senate staffers and health care lobbyists, CQ HealthBeat reports. One Medicaid analyst said $5 billion is a more realistic number. It is "unclear" whether Smith and Sen. Olympia Snowe (R-Maine), "key" Republicans on the committee, will agree to the $10 billion figure, CQ HealthBeat reports. Smith suggested that the Medicaid committee "be conducted by the Institute of Medicine" to ensure credibility. However, other sources said the commission likely will be appointed by HHS Secretary Mike Leavitt. Sen. Max Baucus (D-Mont.), the committee's ranking Democrat, said he opposes a Leavitt-appointed commission and expressed that opinion to the HHS secretary, according to a Senate aide. Although reluctance from committee members to cut Medicaid could indicate that "Medicare cuts may yet be in the offing" under the reconciliation process, committee Chair Chuck Grassley (R-Iowa) has said he does not want to cut Medicare (CQ HealthBeat, 4/28).

Reaction
President Bush said, "This is a responsible budget that reins in spending to limits not seen in years" (Washington Times, 4/29). "Is this a perfect budget? Of course not," Nussle said. He added, "Having a plan is better than not having a plan." Rep. Jeb Hensarling (R-Texas) said, "While we would have liked to have a budget calling for less government and greater savings, this is a good start" (Hook, Los Angeles Times, 4/29). Sen. Hillary Rodham Clinton (D-N.Y.) said, "It is unconscionable to balance the budget on the backs of our most vulnerable Americans" (AP/Las Vegas Sun, 4/28). Democrats, including Rep. John Spratt (D-S.C.), said savings from Medicaid and other programs were would be "squandered on new tax cuts," the Wall Street Journal reports. Spratt said, "We are just kicking the can down the road" (Rogers, Wall Street Journal, 4/29). House Minority Leader Nancy Pelosi (D-Calif.) said, "This budget is an assault on our values" and will "pass mountains of debt on to our children and grandchildren" (Washington Times, 4/29).

Broadcast Coverage
APM's "Marketplace" on Thursday reported on the FY 2006 budget resolution, including $10 billion in Medicaid cuts. The segment includes comments from Robert Bixby, executive director of the Concord Coalition; Stan Collender, a budget expert and National Journal columnist; and Ron Pollack, executive director and vice president of Families USA (Dornhelm, "Marketplace," APM, 4/28).

The complete segment is available online in RealPlayer.