Grassley under pressure on entitlement cuts

Time is running short for Senate Finance Committee Chairman Chuck Grassley (R-Iowa) to reach an agreement on a package of $10 billion in entitlement cuts over five years.

Grassley faces a Democratic minority that opposes the budget reconciliation cuts in principle, a Republican majority that relishes the opportunity to rein in spending on Medicaid and two GOP dissenters who seek to force the chairman to finesse a compromise that can attract some Democrats. 

A potential deal also could require Grassley to forgo new spending items, such as a payment increase for doctors under Medicare, to finalize the budget reconciliation package by the Sept. 16 deadline established by the budget-resolution conference report that passed in April.
As he has throughout the budget-setting process this year, Sen. Gordon Smith (R-Ore.) has positioned himself in the middle of the proceedings as he vies to limit the impact of the cuts on Medicaid.

Along with Sen. Olympia Snowe (R-Maine) and the committee’s ranking Democrat, Sen. Max Baucus (Mont.), Smith is working to force Grassley to look to Medicare for a portion of the cuts and to hold off on new spending that would require deeper cuts to meet the net reconciliation target.

In addition to eyeing reconciliation as a possible vehicle to prevent a cut in Medicare payments to doctors, Grassley reportedly has been considering attaching spending items for other Medicare- and Medicaid-related initiatives.

So far, majority support for any approach to reconciliation has eluded Grassley, who has to either win over Smith or Snowe without losing other Republicans or placate one or more committee Democrats to attract their votes. Whatever package the panel ultimately reports also faces a tough floor fight and the likelihood that the House will approve different, possibly larger, Medicaid cuts.

Finance Committee Republicans appear to agree that the Medicare prescription-drug benefit that will debut in January should not be touched in the search for savings, which accords with the administration’s position.

The Senate also must cope with other urgent pending business. The political aftershocks of the devastation wrought by Hurricane Katrina could complicate the already delicate prospects of enacting significant cuts in programs that mainly serve the poor and the elderly. The cuts also will be debated just weeks after the U.S. Census Bureau announced that the rolls of the uninsured rose by 800,000 since last year.

Moreover, the Senate’s work will be dominated by the nomination of John Roberts to be chief justice and the pending announcement of another Supreme Court nominee.

With most Finance Committee Democrats on the sidelines and most panel Republicans in agreement about tackling Medicaid spending, Grassley faces a tricky balancing act in the next two weeks.

“Every option is on the table as far as he’s concerned” except the Medicare drug benefit, a Grassley spokesperson insisted. The Congressional Budget Office is providing the committee with a continuing stream of budgetary scores of savings options that could be part of the reconciliation package. Grassley’s spokesperson said that, even with less than two weeks to go, no decisions have been made on the contents of the measure.

Nevertheless, the substance of how Congress will address Medicaid spending this year appears to have taken shape over the recess. Among those in agreement with — or resigned to — Medicaid cuts, broad agreement seems to have emerged around changes to the program’s payments for prescription drugs and new restrictions on individuals transferring financial assets to family members or others to become poor enough to qualify for Medicaid benefits. The changes could account for more than half of the cuts needed to reach the Finance Committee’s $10 billion target.

The House Energy and Commerce Committee also must devise entitlement cuts under budget reconciliation, with its net target at $14.7 billion. Chairman Joe Barton (R-Texas) has maintained that revenues raised by auctioning off the digital-television broadcast spectrum will significantly mitigate the need for spending reductions — but also has made clear his strong support for slowing the growth of entitlement spending.

The House Ways and Means Committee’s reconciliation instructions call for only $1 billion in savings, but Chairman Bill Thomas (R-Calif.) may be eyeing a more ambitious agenda that could lead to Medicare cuts.