The cuts mostly spare beneficiaries of the two huge programs of any reductions in benefits or access to health care. But Medicaid benefit reductions are still likely to be on the table in a House version of the budget bill expected to be released next week.
The bulk of savings in the bill comes from cuts to Medicare subsidies to insurance companies and an increase in Medicaid prescription-drug rebates that drug manufacturers must pay to states.
The bill also includes $1.9 billion worth of emergency Medicaid benefits for victims of Hurricane Katrina living in Louisiana, Alabama, and Mississippi.
Political groups have long worried about potential cuts to health benefits as Congress moves to shave tens of billions of dollars from federal spending. Though the Senate bill mostly avoided such cuts, it did attract debates on several contentious issues surrounding Medicare.
Negotiating Drug Prices
Senators rejected an amendment giving the federal government authority to negotiate directly with drug manufacturers. The drugmakers are getting ready to sell billions of dollars worth of medications through the new Medicare Part D prescription drug benefit.
Following the vote, Sen. Ron Wyden (D-Ore.) vowed to keep pushing the Medicare bargaining issue "again and again and again."
Current Medicare law bars the government from bargaining for lower prices with drugmakers, a fact that many lawmakers see as a financial giveaway to the pharmaceutical industry because it keeps drug prices higher.
"Let's give this power to the secretary [of health and human services] to save money for the program and save money for seniors," said Sen. Olympia Snowe (R-Maine).
The amendment gained a 51-vote majority Thursday but failed to pass because procedural rules required 60 votes for approval.
Former Health and Human Services Secretary Tommy G. Thompson called for negotiating authority when he stepped down from his cabinet post in December of last year. Thompson led White House efforts to pass the Medicare drug benefit over the objections of many Democrats but surprised his colleagues when he told reporters that the bargaining ban was one of the biggest regrets of his tenure in President Bush's cabinet.
"I would like to have had the opportunity to negotiate," he said.
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.