A budget resolution passed by a House panel last week could force lawmakers to sharply cut provider payments if they intend to add a prescription drug benefit to Medicare.
With a goal of balancing the federal budget by 2010, House Budget Committee Chairman Jim Nussle (R-Iowa) said in his committee's proposed budget for 2004 that the government must reduce spending by 1% in all programs except defense and homeland security. Medicare and Medicaid would not be excluded.
The House resolution serves only as a blueprint Congress will use to debate the budget and craft a final proposal. The Senate Budget Committee passed its own resolution last week, mandating budget cuts but not including the same tough tradeoffs suggested by the House panel.
"There was a lesson in the Balanced Budget Act of 1997," said Chip Kahn, president of the Federation of American Hospitals. "The question is, why would you want to go back there again?"
It was not clear by what dollar amounts Medicare and Medicaid would be cut under the House budget proposal since lawmakers with jurisdiction over several agencies could take more from one than another to achieve the 1% reduction target. A Budget Committee source estimated that Medicare spending would drop by as much as $215 billion over 10 years if the House resolution becomes law.
"What's amazing is that they're anticipating more than $200 billion in provider cuts to help pay for prescription drugs," an AARP official said. Saying the House budget proposal has little chance of advancing, the official added: "I'm not even sure the (Bush) administration supports it, and I'd be very surprised if moderate Republicans in the House would vote for it."
Under the House budget proposal, "the committees are faced with two choices: They can make draconian cuts in Medicare and Medicaid, the likes of which no one has ever envisioned ... or they don't have to provide a prescription drug benefit," said Tom Nickels, senior vice president of federal relations at the American Hospital Association.
Nussle's proposed budget measure could imperil the $400 billion President Bush proposed spending in 10 years on a Medicare prescription drug benefit, sources said. The resolution authorized new Medicare spending of $428 billion under the condition that $400 billion of it be financed by unspecified cuts, according to a House Budget Committee aide (See chart).
"Medicare seems like a likely place to get that money," the aide said.
The House budget resolution would allow any savings derived from Medicare reform to count toward the 1% reduction target, but healthcare policy experts said such savings wouldn't occur for several years, assuming reform takes off in the first place.
"Medicare reform in its recent iterations is not something the Congressional Budget Office has given significant savings amounts to," Nickels said. "It's highly unlikely that reform could achieve anywhere near the savings the (House) budget committee is demanding."
Under the House proposal, the Energy and Commerce and the Ways and Means committees-which preside over Medicare and Medicaid-would have to slash spending for the programs under their jurisdiction by some $370 billion between now and 2010.