Lawmakers also turned back several other contentious amendments, including one seeking nearly $5 billion in additional Medicaid benefits for Hurricane Katrina evacuees now spread throughout the country.
Senators also rejected a measure that would have required Medicare beneficiaries to sign a consent form before signing up for Medicare's new drug benefit, which is due to start enrolling patients in less than two weeks.
Sen. Frank Lautenberg (D-N.J.) said the measure was necessary because many beneficiaries were unaware that the drug plan stops paying benefits after $2,250 in annual drug costs and does not kick in again until costs reach $5,100.
"I want to make sure that they understand what it is they are applying for," Lautenberg said.
Republicans rejected the idea. "Essentially it creates an unacceptable level of paperwork," said Senate Budget Committee Chairman Judd Gregg (R-N.H).
The Senate's strategy of cutting spending while avoiding benefit cuts could face a challenge when the House begins its debate on a budget bill next week. House members are expected to cut up to $54 billion and attempt to slow the growth in Medicaid while avoiding Medicare changes altogether.
The White House several days ago threatened to veto the budget bill if it contains the Senate's cuts to Medicare industry subsidies.
Part of the House package will include moves to give state governors more flexibility to cut costs by reducing some benefits or raising costs paid by Medicaid patients.
"We're putting some basic reforms in that frankly should have been done a long time ago," Rep. Joe Barton (R-Texas), chairman of the House Energy and Commerce Committee, said Thursday.