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Many Hurdles Remain Before Budget Deal Is Sealed

APRIL 22, 2005 -- Despite indications that the administration is on the verge of a deal with Sen. Gordon H. Smith, R-Ore., on Medicaid cuts, budget negotiators still must resolve a series of tough issues if they hope to consider a conference report before the Senate departs for a one-week recess April 29. It appears that Smith has an agreement from the administration to appoint a commission to study implementing the Medicaid cuts that would be assumed as part of a budget conference report's reconciliation instructions to the Senate Finance Committee.

According to a Senate GOP source, the Medicaid savings number would be below the $12 billion sought by Senate Budget Chairman Judd Gregg, R-N.H.

Budget writers hope that a Medicaid deal will catalyze an overall agreement, but it remains unclear whether they can find enough savings in other programs to secure the $40 billion to $45 billion in mandatory savings they have been discussing.

With a tentative deal in place to move $70 billion in tax cuts through a fast-track reconciliation bill, the focus has largely been on mandatory spending cuts. The House budget (H Con Res 95) called for $68.6 billion in such cuts and the Senate approved $17 billion in cuts.

Yet before adopting its budget last month, the Senate voted to strike a $15 billion instruction to the Finance Committee to find savings, most of which would have come from Medicaid. Gregg and conservatives in the House have insisted that the budget must extract savings from among the three major entitlement programs: Medicare, Medicaid, and Social Security.

But the president's campaign to restructure Social Security appears to have taken savings from the retirement system off the table. "Medicaid savings [are] the cornerstone of this budget and Chairman Gregg has been fighting for every possible dollar," Budget Committee spokeswoman Gayle Osterberg said Friday.

Gregg was not present at two sets of Thursday discussions among Smith, Health and Human Services Secretary Michael O. Leavitt, and Senate Republican leaders. And reluctance among lawmakers and aides to discuss details of an emerging agreement appear to be based, at least in part, on the need to brief other players.

"Negotiations are ongoing, but there is no agreement in place," a Smith aide said Friday. The Senate has appointed budget conferees, but the House has not, preferring to wait until a budget deal is imminent to avoid contentious motions to instruct conferees on a variety of topics. Even if Medicaid cuts are restored in the conference report, Gregg and House Budget Committee Chairman Jim Nussle, R-Iowa, have yet to demonstrate how they would get to $40 billion in cuts from mandatory spending. Even if Gregg were to get $12 billion from Medicaid, which is looking increasingly unlikely, that would move his figure up to $29 billion.

Some of the remaining savings would almost certainly come from the chambers' tax-writing panels. The House budget instructed the Ways and Means Committee to find $18.7 billion in savings. But, after the Senate adopted Smith's floor amendment aimed at blocking Medicaid cuts, the Senate budget contained no savings instruction to the Senate Finance panel.

Ways and Means Chairman Bill Thomas, R-Calif., has given little indication of where he might look for savings, but others have said Medicare is a possible target. Through various programs, the universe of cuts available to Thomas is as much as $60 billion, according to Rep. Eric Cantor, R-Va., a member of the Ways and Means Committee and the GOP leadership.

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