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Budget's $50 Billion for Kids—Will it Materialize?

By John Reichard, CQ HealthBeat Editor

May 17, 2007 -- The budget deal (S Con Res 21) adopted Thursday by the House and Senate authorizes a $50 billion reserve fund to expand coverage of uninsured children, a provision hailed by Democrats. But it doesn't simplify the process of actually finding that money.

Because the reserve fund is "deficit-neutral," lawmakers will have to cut spending elsewhere in the federal budget or raise taxes to come up with the $50 billion. "What's the purpose of a reserve fund without any reserves?," asked a House GOP aide. "If you're not putting any money on the table, $50 billion is a hard number to hit."

Senate Finance Committee Chairman Max Baucus, D-Mont., issued a statement late Wednesday emphasizing that the budget agreement can "extend health coverage to as many as 12 million lower-income, uninsured American children." Baucus was counting the six million kids already covered by the State Children's Health Insurance Program (SCHIP) and up to six million more who would be covered by expanding the program, as well as enrolling more uninsured children in Medicaid.

"Now we have a blueprint for the right priorities in Congress," Baucus declared.

However, lobbyists assume that much—and perhaps all—of the money for covering kids will have to come from Medicare cuts. The budget deal contains no reconciliation instructions governing Medicare provisions, which would have prevented Medicare cuts from being blocked by filibuster.

Baucus now must complete a legislative package he's been assembling to finance the expansion of SCHIP and Medicaid. Senate Democratic aides say he plans to do so in time for a markup shortly after the Memorial Day recess on a measure that would provide a five-year reauthorization for SCHIP, which expires Sept. 30. Aides say the financing provisions will be marked up at the same time.

But there's considerable skepticism about whether Baucus can get the job done because of the political power of health care lobbies facing potential cuts, including those representing private health plans in Medicare and hospitals.

In addition, lobbyists note lawmakers will have to find a way to pay for blocking a scheduled 10 percent cut in payments to doctors, a physician payment "fix" expected to also force cuts elsewhere in Medicare.

Asked how much the $50 billion reserve fund in the budget actually means, one state health policy analyst said, "I don't think it does mean anything. It's more a message, a statement of intent."

Reconciliation provisions would have "taken the filibuster off the table." But "reconciliation is really hard to do," the analyst said. By creating a mechanism to simplify cuts, it binds lawmakers into making budgetary decisions that could be politically unpopular, he said.

While Senate Democrats, some Senate Republicans, and insurance and hospital lobbying organizations have mentioned the possibility of taxing tobacco to pay for covering kids, "the more you tax it, the less consumption there is," the analyst said, adding that the result is less revenue for the states from tobacco taxes. States, along with the federal government, fund both the SCHIP and Medicaid programs.

Another factor in finding the money to expand children's coverage is how big an obstacle President Bush would be to such a step. "If there's a $50 billion expansion that includes taxes and Medicare cuts, I bet he vetoes it," the analyst said.

"It's absolutely going to be hard, but it's absolutely doable," the Senate Democratic aides insisted. "There will be good policy options to get the $50 billion," they added.

Baucus hasn't elaborated on how he'll come up with the $50 billion, other than to say he would consider the possibility of a tobacco tax increase as well cuts to private plans in Medicare. "Everything is on the table," the aides said.

While financing children's coverage won't be easy, efforts by Democrats to find offsets are well under way. The House Ways and Means Committee or its subcommittees have had nine hearings so far this year on Medicare, and plan a hearing May 22 on private fee-for-service plans in the program. Ways and Means Health Subcommittee Chairman Pete Stark, D-Calif., said this week that he's aiming to complete a package of Medicare cuts over the next six weeks.

Regarding a potential presidential veto, a House Democratic aide said the White House would be hard pressed to justify such a step. "President Bush had a lot more than $50 billion in provider cuts in his own budget," the aide said.

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