The plan trimmed $40 billion from the federal budget over the next five years and in so doing also cut $4.8 billion from the Medicaid health program for the poor. Much of the cost of the cuts was paid for by new rules allowing states to raise the share that recipients pay out of pocket for their care.
The bill also gives states more leeway in limiting covered benefits or paring back who qualifies for the program and makes it harder for low-income people to spend assets in an effort to qualify for coverage.
The changes were favored by most state governors, who said they were needed to help control a projected 7% annual rise in Medicaid costs over the next decade. States share Medicaid costs with the federal government.
Cheney Breaks Tie
The cuts bitterly divided the Senate, which spent days deadlocked in a fight over the measure. Five moderate Republicans joined all 44 Democrats and one Independent in voting against the GOP-led plan Wednesday, locking the Senate in a 50-50 tie.
That forced Vice President Dick Cheney to use his rarely-exercised Constitutional role as President of the Senate to vote on the bill and push it to a 51-50 victory.
Republican leaders hailed the vote as a step toward controlling federal spending and protecting the long-term viability of taxpayer-funded health programs. Sen. Judd Gregg (R-N.H.), chairman of the Budget Committee, says that the cuts were small compared with a 35% to 40% projected rise in Medicaid's costs over the next five years.
"We haven't cut it," Gregg says. He added that giving states more latitude to shape benefits would "allow them to deliver more services to more people at a slower rate of growth."
"The bottom line is we stood firm and we made tough choices," says Sen. Rick Santorum, (R-Penn.), the third-ranking member of the GOP leadership.
But many bill opponents railed against the cuts as immoral at a time when Republicans continue to favor tax cuts.
Sen. Harry Reid, (D-Nev.), the Minority Leader, called the budget bill "un-American."
"This bill targets Americans with the greatest needs and the fewest resources. These people need more help with their health care, not less," Reid says.
"Within these pages are things that will come to embarrass us," says Sen. Richard Durbin (D-Ill.), referring to the budget bill's text.
The measure also cuts more than $6 billion in spending on Medicare over the next five years, including a $1.2 billion reduction in payments to hospitals. At the same time, it avoids a planned 4.4% cut in doctor payments by pouring $7.3 billion into the program.
Doctors' groups lobbied aggressively for the increase, saying it was needed for them to continue providing services to the elderly. Democrats warned that it would translate to higher payments by those patients because beneficiaries pay 25% of the cost of doctor visits through premiums.
"They'll go up, up for all seniors," Reid said before the vote.
AARP, the powerful seniors' lobbying group, strongly opposed the cuts and vowed to exact a political cost on lawmakers who voted to support them. "This vote is so important to us that we will emphasize it throughout the coming year and into the midterm elections" in November 2006, John Rother, the groups chief lobbyist told reporters.
The budget passed the House 212-206 in a predawn vote Monday shortly before the body adjourned for the year. In an unusual move Wednesday, Senate Democrats placed one last hurdle in the bill's path before it reaches President Bush for a signature.
Democrats used Senate procedures to slightly alter the bill's final language before passing it. That will force at least part of the House to reconvene in the coming weeks to revote on a measure it has already passed.