Medicare spending would be capped at a 5% annual growth rate and Medicaid at 4%, for a combined $467 billion reduction in spending over seven years, under a Republican budget plan passed by the House last week.
Lawmakers voted 238-193 to approve the GOP fiscal blueprint.
Earlier the House rejected by a vote of 325-100 a Democratic alternative that would have reduced Medicare and Medicaid spending by a combined $311 billion over the same period. The Democratic plan did not contain the $325 billion tax cut included in the Republican proposal. Hospital groups had supported the defeated Democratic alternative.
Meanwhile, the Senate began work on its own budget, which includes $431 billion in Medicare and Medicaid savings by 2002. A final vote on the Senate plan is expected later this week. Democrats are expected to propose several amendments that would reduce the level of healthcare-related spending reductions.
The Congressional Budget Office estimates a $170 billion economic windfall will result from balancing the budget. Democratic budget amendments would use those funds to offset the Medicare and Medicaid reductions included in the Republican plan. Senate Budget Committee Chairman PeteDomenici (R-N.M.) has earmarked the $170 billion for a tax cut.
However, Senate Democrats may have Republican allies in their attempts to steer the savings toward reducing the level of Medicare and Medicaid cuts. Last week, a group of seven moderate Republican senators sent a letter to Senate Majority Leader Robert Dole (R-Kan.) opposing a tax cut.
Shortly before the House passed the Republican budget, White House Chief of Staff Leon Panetta said the Clinton administration opposed the Republican plan. Panetta also laid out a series of conditions he said would have to be met before the administration would work with congressional Republicans. Those conditions included dropping plans for a tax cut, reducing the level of Medicare and Medicaid spending reductions, and working on Medicare reforms in the context of broader healthcare reform.