Senate dismisses Bush's plan for Medicare budget cuts

Washington -- In last month's opening round of the fiscal year 2007 budget debate, the Senate rejected President Bush's call to slash tens of billions of dollars from planned Medicare growth.

The upper chamber instead approved a $2.8 trillion budget resolution for next year that largely leaves Medicare on its current funding course. If both the House and the Senate can agree on a compromise version of the measure, it would serve as a blueprint for the appropriators who authorize money for the government's programs.

House budgeters at press time were working on a resolution that would more closely follow the White House plan, setting up a potential fight between the chambers over the final version. Congress still can set funding levels for government programs without a blueprint in the event lawmakers are unable to draft a consensus package.

The White House recommended in its budget that Congress restrain Medicare spending by nearly $36 billion over the next five years. While the bulk of savings would come from hospitals, skilled nursing facilities and medical equipment providers rather than physicians, the proposed level of austerity would complicate doctors' requests for tens of billions of dollars in funding to reverse upcoming Medicare reductions.

Although fiscal conservatives in Congress applauded Bush's plan, they soon realized that the Senate does not have enough of an appetite to cut federal entitlements to a large degree in an election year, said Senate Budget Committee Chair Judd Gregg (R, N.H.). Republicans as well as Democrats showed resistance to such Medicare cuts.

"Unfortunately, on our side of the aisle there was also a fair amount of hesitancy on that issue," he said. "I went to the chairmen of the various committees that the president suggested do these entitlement changes, and they all said they could not get the votes on their own committees to pass them out."

In another sign that lawmakers are hearing warnings from the American Medical Association and others about the possible dangers of Medicare cuts to physicians, the Senate approved a "reserve fund" in its budget to pay for these reimbursement increases.

If accepted by the House, the provision would not authorize any new money but would make it easier for lawmakers to pass separate legislation that would. Appropriators could find dollars elsewhere in the budget to cover increased payments to doctors.

The AMA applauded the provision's sponsor, Sen. Kay Bailey Hutchison (R, Texas), for her "commitment to preserve seniors' access to health care by working to stop drastic Medicare cuts to physicians."

A louder Medicare alarm system

Congressional budget hawks did succeed in boosting a commitment to restraining future Medicare spending.

The Senate-passed budget resolution contains a provision that would strengthen a spending trigger built into the program's financing system. After the second consecutive time the program's trustees report that 45% or more of total Medicare expenditures would need to come out of general tax revenues in any of the next six years, the alarm would be tripped.

This would require the White House to fast-track spending reductions or tax increases for congressional consideration during the next legislative session.

The Senate plan would go one step further by mandating that when this trigger is hit, any increase in Medicare mandatory spending -- including payment boosts for physicians -- would require tax increases or cuts elsewhere in the budget unless supporters could round up 60 votes to waive the restriction.

Medicare's trustees are expected to make their second consecutive 45% prediction in early 2007, forcing Congress and the White House to contemplate long-term Medicare financing in early 2008, yet another election year.

The AARP urged senators to remove the stronger trigger language, saying patient care would suffer if physicians and others were punished for rising health care costs.

But lawmakers said such fiscal discipline is vital to preserving the program for its patients.

"Just in Medicare and Medicaid alone, in the last five years, we have seen a 22% increase in entitlement spending," said Sen. John Cornyn (R, Texas). "And if we don't do something in the next 30 years about entitlement spending, we won't have a dime of revenue to pay for other items that are important, such as defense, education, NIH research and payments to health care providers to reimburse under Medicare and Medicaid."

Medicare drug benefit changes

The Senate budget resolution also opens the door for the federal government to make several reforms to the nascent Medicare drug benefit.

Two other reserve funds would make it easier for Congress to approve legislation allowing the Dept. of Health and Human Services to extend the initial beneficiary enrollment period beyond May 15 and negotiate with drug companies to secure discounts. Both changes are prohibited by Medicare statute.

Congressional aides said the two provisions were largely symbolic. Although the direct negotiation piece is supported by the American Medical Association and many other groups, the White House and pharmacy benefit managers who administer the benefit insist it would lead to artificial price controls that would harm beneficiaries. President Bush also has said an extension of the May 15 enrollment deadline is unnecessary.