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Medicaid Cuts: $20 Billion in the House, $15 Billion in the Senate

March 2005

The House budget resolution assumes $20 billion in future reductions to Medicaid over the next 5 years, while the Senate version assumes $15 billion over the same period. However, the budget resolution does not specify where these cuts are to be made and instead defers to the committees of jurisdiction in Congress – the House Energy & Commerce Committee and the Senate Finance Committee – to fill in the details. At the same time, HHS Secretary Mike Leavitt is expected to continue discussions with the nation's governors over reforms to Medicaid. If agreements were to be reached on a bipartisan basis, such proposals would almost certainly be included in any final reconciliation bill later this year.

By contrast, the President's FY 2006 budget assumes $20 billion in gross savings over the next 5 years, with $6 to $7 billion plowed back into the program, for a net reduction of $13 to $14 billion. This occurs through a series of reforms including: clamping down on practices by states such as "intergovernmental transfers," curbing asset transfers by family members for nursing home placement, and limiting matching federal funds for targeted case management. Last week, the Congressional Budget Office (CBO) challenged the Administration's assumptions about the savings that could be derived from these reforms and estimated that they could save as little as $9 billion over the next 5 years.

Under House and Senate rules, the budget resolution does not have the force of law. Rather, it is a spending blueprint that contains assumptions regarding tax and spending policies that govern spending bills Congress will take up later this year. This includes "instructions" to various committees in the House and Senate to come up with savings to specific programs – including entitlements such as Medicaid. This culminates in a budget "reconciliation" bill that is taken up later in the year that is not subject to a filibuster in the Senate (i.e., it can pass by a simple majority, rather than 60 votes as is normally required).

Click here for more information on the Medicaid program and its importance to children and adults with severe mental illnesses.

Click here for additional information on the Smith-Bingaman Amendment.