Congress Cuts $10 Billion from Medicaid

May 18, 2005

The U. S. Congress agreed this week on a $2.56 trillion fiscal year (FY) 2006 budget resolution that includes a $10 billion cut in Medicaid expenditures over the next five years and $106 billion in tax cuts over the same time period. Because the budget resolution only sets the parameters on Congress’ spending for the coming fiscal year, no details on the method by which Congress will achieve the Medicaid cuts are included. However, the sheer size of the cuts agreed to for the Medicaid program, which serves more than 50 million U.S. citizens, will undoubtedly translate into substantial reductions in either enrollment or services.

Earlier this month, the Senate and House passed budgets that contained radically competing proposals on Medicaid. While the House decided to cut Medicaid by $14 billion over five years, the Senate’s budget omitted any cuts and instead set aside funds for the creation of a Medicaid Commission to consider possible changes to the program. Because of the importance that President Bush and various members of Congress have placed on reducing entitlement spending in order to cut the federal deficit in half by 2010 (a deficit which will exceed $400 billion in FY 2006), the competing Medicaid proposals stood to derail the budget conference at which the respective bodies were to harmonize their differing budget proposals.

The potential for derailment appeared to heighten recently when the 44 House Republicans delivered a letter to House Budget Committee Chairman Jim Nussle (R-La.) requesting that the Medicaid cuts in the House’s budget resolution be erased. Then came a Democratic motion at the beginning of this week to instruct the House-Senate budget conferees to eliminate the Medicaid cuts from the FY 2006 budget. This motion, nonbinding and somewhat weak in form, passed the House by a vote of 348-72, and appeared to set the stage for a dramatic conference fight over Medicaid.

However, the budget conferees only needed a day to neotiate the budget and agreed to the $10 billion over-five-years Medicaid cut. The Senate and House immediately thereafter voted in favor of the conference’s agreement. News reports indicate that the agreement was reached after Senator Gordon Smith (R-Or.), considered the leader of moderate Republican opposition to Medicaid cuts, was promised that the Medicaid commission he has called for would be created. Details relating to the committee are still being worked out, but initial reports indicate that the committee will be charged with providing recommendations on changes to the program no later than September 1, and that all commission members will be appointed by President Bush. The legislation Senator Smith sponsored earlier this year called for a bipartisan commission that would be allowed an entire year to consider program changes.

Specifics of the cuts will now be left to the Senate Finance Committee and House Energy and Commerce committee to decide on, and their proposals will only require a bare majority of each chamber before being submitted to President Bush. Because the fundamental elements of the president’s own FY 2006 budget proposal – large reductions in entitlement spending more than matched with larger tax cuts-have essentially been adopted by Congress, it is likely that the president will sign what Congress presents.

Source: National Senior Citizens Law Center, Washington Weekly, Vol. XXXI, Issue No. 17.