UPDATE: Senate and House Republicans Set to “Kick the Can” on Medicaid Spending Cuts

Editors: Patti Boozang and Katie Rubinger 
Author: Nick Bath

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tl;dr

• To unlock the next step in the budget reconciliation process, House and Senate Republicans are close to agreeing on a budget resolution. However, their “agreement” will essentially enable the stalemate to continue until final reconciliation legislation is drafted.

• The budget resolution passed early Saturday morning by the Senate preserves the requirement that the House Energy & Commerce (E&C) Committee make big spending cuts (including to Medicaid) but requires much more modest cuts from Senate committees.

• If the House passes the Senate budget resolution as-is, each chamber will then begin to construct reconciliation bills within the very different guardrails set out in the resolution.

• This sets up a scenario where the hard decisions on Medicaid cuts are punted until the end of the budget reconciliation process, continuing to put Medicaid program funding and benefits at risk.

The 80 Million Impact

Quick recap on budget reconciliation process

As our Manatt Health colleagues Jocelyn Guyer, Avi Herring and Katie Rubinger wrote in Medicaid Madness: What States and Providers Need to Know About Budget Reconciliation, Congressional Republicans are using the budget reconciliation process to enact the president’s top legislative priorities. The major advantage of the budget reconciliation process is that it can be used to pass legislation in the Senate on a 51-vote majority, rather than requiring the 60 votes that virtually everything else needs to surmount a filibuster. It is tempting to ignore the zigs and zags of the reconciliation process, but it will dictate the future of Medicaid. Here’s where things stand.

What’s happening in the budget reconciliation process this week?

To unlock the next step in the path to budget reconciliation, both chambers need to pass an identical budget resolution. The Senate passed a budget resolution early Saturday morning, which now goes to the House for consideration. Speaker Johnson sent a letter to his members over the weekend making the case for passing the Senate resolution, writing that passage of “the Senate’s amendment to the House resolution will allow us to finally begin the most important phase of this process: drafting the reconciliation bill that will deliver on President Trump’s agenda and our promises to the American people.” Up to this point, the two chambers disagreed strongly on the level of spending cuts that the budget resolution would require of the (subsequent) budget reconciliation bill; there has always been basic agreement on the spending (or more precisely, revenue loss) side of the ledger — extension of the Trump tax cuts for 10 years at a cost of roughly $4 trillion.

House fiscal hawks want deep spending cuts to offset (but not come close to fully paying for) those tax cuts – the most controversial of which were $880 billion in cuts over the next 10 years from the jurisdiction of the Energy and Commerce Committee, which oversees Medicaid. Most observers, including CBO, agree that that majority of those cuts would have to come out of the Medicaid program. Senate Republicans and some moderate House Republicans have serious concerns about the substantive and political consequences of cutting the Medicaid program at that unprecedented level.

The Senate-passed resolution simply kicks the can on this disagreement by preserving the requirement that House Committees make big spending cuts, including cuts to Medicaid, but requiring much more modest cuts from the Senate. This creates the improbable situation of each chamber passing very different reconciliation bills. But, in the final analysis, the President can only sign one bill.

Who decides whether the House or Senate approach prevails? And when?

In fact, this hard decision can be postponed to the last possible minute. Assuming the budget resolution passes both chambers, the House can then draft and pass a reconciliation bill that makes the deep cuts that the budget resolution requires (and fiscal conservatives desire). The Senate can then take up the House bill and strike and replace it with its own, more modest, spending cuts (in fact, this is exactly what the Senate did in 2017 during the ACA repeal and replace debate).

“Decision time” will arrive when the Senate passes its version and sends it back to the House for final passage and delivery to the President’s desk. Speaker Johnson will then have to make the key call – does he try to “roll” his hard liners and put the unchanged Senate bill up for a vote? Or does he bow to the fiscal hawks, amend the Senate bill with deeper cuts, and send it back? We would be lying if we said we could predict a result.

The Bottom Line

Congress is poised to move to the next step in the budget reconciliation process, and the bullseye on federal Medicaid funding is still a key savings generator. That means that all of the proposals we’ve been talking about to cut Medicaid, and the related consequences they carry are very much on the table and could further advance as the House and Senate committees continue their work to draft reconciliation legislation.

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