House Approves $39.7B Budget Spending Cut Package, Including Medicare, Medicaid Reductions

The House early on Monday adjourned for the year after approving a $39.7 billion fiscal year 2006 spending cut package (S 1932) and a $453 billion Department of Defense spending bill, Bloomberg reports (Dodge, Bloomberg, 12/19). The House's 212-206 vote to approve the deficit reduction package -- which includes about $6.4 billion in net savings from Medicare and about $4.8 billion in net savings from Medicaid over five years -- came after Republican leaders moved a provision allowing oil drilling in the Arctic National Wildlife Refuge into the Defense spending bill, CQ Today reports. Approval of the bill also followed House Speaker Dennis Hastert's (R-Ill.) "last-minute" agreement to implement fewer cuts to medical equipment suppliers under Medicare. As a result, Medicare cuts were trimmed by about $2 billion (Dennis, CQ Today, 12/19).

Medicare Budget Provisions
The budget calls for Medicare physician payments to be frozen at FY 2005 levels, a provision that would avert a 4.4% payment rate reduction scheduled to take effect Jan. 1. Maintaining the FY 2005 rate would cost $7.3 billion, according to the Congressional Budget Office. Payments for home health providers also would be frozen at FY 2005 levels, for $2 billion in savings, although agencies serving rural areas would receive an increase. Medicare payments to doctors for some imaging services would be reduced in 2006 and 2007 (Schuler, CQ Today, 12/19). The final package would not eliminate a stabilization fund created under the 2003 Medicare law for private insurers, a provision that had been opposed by the White House (Weisman/Murray, Washington Post, 12/19). Eliminating the fund would have saved $5.4 billion over five years (Schuler, CQ Today, 12/19). However, the final bill would eliminate a separate private insurance subsidy for savings of $6.5 billion.

Medicaid Budget Provisions
The spending reduction bill includes an estimated $10 billion in Medicaid savings over 10 years, in part by allowing states to increase copayments and deductibles for many beneficiaries and through health benefit reductions (Washington Post, 12/19). The bill would change the way pharmacists are reimbursed and limit asset transfers for beneficiaries seeking long-term care coverage under Medicaid (CQ HealthBeat, 12/19). The bill also includes new spending that would help the states most affected by Hurricane Katrina with Medicaid costs (Schuler, CQ Today, 12/19).

Reaction
Hastert said, "This bill is a good first step towards addressing the long-term spending challenges in the federal budget," adding, "I am proud that House Republicans have put in the long hours and hard work necessary to make this happen" (Hulse, New York Times, 12/19). Kirsten Sloan, chief health lobbyist for AARP, said, "AARP strongly opposes the current conference agreement. This is irresponsible policy and will harm millions of low-income Medicaid beneficiaries, millions of older persons who need long-term care and unfairly increases Part B premiums for all Medicare beneficiaries" (Schuler, CQ Today, 12/19).

Defense Bill Provisions
In other congressional news, the House on Monday voted 308-106 to approve the FY 2006 Defense spending bill (Plummer, CQ Today, 12/19). The bill includes $3.8 billion for avian flu prevention measures, and $29 billion in hurricane assistance (Shaw, Baltimore Sun, 12/19). A provision -- supported by Senate Majority Leader Bill Frist (R-Tenn.) -- added near the end of negotiations would allow lawsuits against flu vaccine manufacturers only if the companies engaged in "willful misconduct." In addition, the government would pay medical expenses and benefits to individuals injured or killed by vaccines. While Frist argued the provision was necessary to encourage drug companies to make vaccines, it likely will "draw criticism," the New York Times reports (New York Times, 12/19).

Senate Schedule
The Senate is expected to vote on both bills sometime this week (Baltimore Sun, 12/19). Some moderate Republican senators have been "rankled" by proposals to increase Medicaid beneficiaries' costs, CQ Today reports. For example, Sen. Gordon Smith (R-Ore.) and six other moderate Republicans in a letter last week asked Frist to avoid changes that would increase Medicaid beneficiaries' costs. According to CQ Today, it is not clear whether those senators will vote for the spending cut package (Schuler, CQ Today, 12/19). Senate Democrats likely "will try to filibuster" the Defense spending bill and are expected to argue that "adding the drilling provision at the last minute was a perversion of Senate rules," the Washington Times reports (Dinan, Washington Times, 12/19). But Frist said, "I believe that we have the votes," adding, "I obviously wouldn't be doing this if I didn't think I had the votes" (Kane, Roll Call, 12/18).