Senate, House at odds on how to cut Medicaid

Congressional Republicans agree that cutting taxes is their top priority, but the House and Senate have diverged on how, and how much, to cut Medicaid.

The Senate approved a budget resolution in the early hours of Saturday that calls for $4 billion in spending cuts to offset a small portion of the $5.8 trillion cost for the tax cuts. By contrast, the House-passed budget resolution seeks at least $1.5 trillion in spending reductions including $880 billion from the Energy and Commerce Committee, which has jurisdiction over Medicaid.

Related: Senate unveils budget resolution with less draconian health cuts

The tax-and-spending-cuts package nevertheless crossed a key threshold when the Senate voted 51-48 to adopt the budget resolution. Republican Sens. Susan Collins (Maine) and Dr. Rand Paul (Ky.) joined Democrats in opposition. The GOP has a 53-47 edge over Democrats and allied independents in the upper chamber.

Healthcare dominated the debate leading up to the Senate budget vote, which sets up tricky negotiations between Republican leaders in the two chambers who are under pressure from the White House to swiftly send a tax bill to President Donald Trump. Now, the House must pass a new budget resolution before Congress can write the actual legislation to cut taxes and spending. House Speaker Mike Johnson (R-La.) aims to complete that first step this week.

Not only did the Senate eschew spending reductions on the same scale as the House, but Johnson is contending with a cohort of conservatives who want to cut even deeper, which is the same reason Paul voted against the Senate budget. On the other side, GOP lawmakers up for reelection in difficult races have cautioned they would not support Medicaid cuts that harm providers and beneficiaries, and Democrats are firmly opposed.

One vote during the Senate debate underscored the significant concern about the Medicaid cuts possible under the House budget.

Senate Finance Committee ranking member Ron Wyden (D-Ore.), Sen. Josh Hawley (R-Mo.) and 15 other senators proposed an amendment to rescind the House's instruction that the Energy and Commerce Committee cut $880 billion in spending. According to the Congressional Budget Office, that money would almost entirely have to come from Medicaid because Trump and congressional GOP leaders have declared Medicare off-limits.

Although the amendment failed on a 49-50 vote, it attracted three Republicans: Hawley, Collins and Sen. Lisa Murkowski (Alaska).

Senate Finance Chair Mike Crapo (R-Idaho) insisted that, whatever the CBO says, Congress can somehow slash Medicaid funding without hurting anyone. "President Trump has been clear: Any reforms to Medicare or Medicaid must not reduce patient benefits," he said, notably leaving out providers anxious about the consequences. The Finance Committee has legislative authority over Medicare and Medicaid.

The Senate's less severe approach to spending cuts and the close losses of the Wyden-Hawley amendment and others to shield providers and Medicaid enrollees from harm may reassure Republican lawmakers worried that cutting the program will trigger a backlash. According to a survey the health policy research institution KFF conducted in February, only 17% of Americans support cutting Medicaid.

Not only does the Senate budget resolution include spending cuts that are a meager fraction of those the House approved in February, but the upper chamber employed a novel accounting method that would essentially ignore most of the cost to permanently extend tax cuts Trump enacted during this first term, which are due to sunset at the end of the year. Essentially, the Senate budget assumes the tax cuts are not expiring because extending them maintains the status quo, which is a significant departure from standard budgetary practices.

As such, the Senate budget projects the tax cuts would add $1.5 trillion to the deficit over 10 years, rather than $5.8 trillion, by disregarding $3.8 trillion in revenue the government would collect if the tax cuts expired as scheduled.

Deficit hawks in the House have scoffed at this math, arguing that the effect on the deficit is real regardless of the accounting. In addition, the tax-and-spending bill is likely to restore some tax cuts that previously expired, implement new ones, and increase spending on border security, defense and energy programs, which adds to the price tag.

This sets up a struggle for Johnson, who can afford to lose just three votes in the House, where Republicans hold a 220-213 majority.

Four Republicans have already declared opposition on budgetary grounds, including Rep. Dr. Andy Harris (Md.), who chairs the conservative House Freedom Caucus, and Rep. Thomas Massie (Ky.), who voted against the House budget resolution because it wouldn't cut spending enough.

Other prominent conservatives trashed the Senate plan, including House Budget Committee Chair Jodey Arrington (R-Texas). “The Senate response was unserious and disappointing, creating $5.8 trillion in new costs and a mere $4 billion in enforceable cuts, less than one day’s worth of borrowing by the federal government," he said in a news release.

Johnson could appease Arrington and other conservatives by sticking to the larger spending cuts in the House budget yet still rely on skittish Republicans to vote in favor based on the assumption that the Senate would moderate the effects on Medicaid and other programs in the final package.

Once the House and Senate come to terms on the budget resolution — which does not require presidential action — the House Energy and Commerce Committee, Senate Finance Committee and other panels will begin the real work of making tough decisions about specific spending cuts and preparing legislation for Trump to sign.