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Senate Budget Chairman Targets Medicaid, not Medicare

February 1, 2005—Senate Budget Committee Chairman Judd Gregg, R-N.H., said Tuesday that Medicaid will see a "more restrained" budget in fiscal 2006, but he promised to involve state governors in the process.

Gregg has signaled a desire to put federal Medicaid spending on the chopping block as part of an effort to reduce the record budget deficit. The National Governors Association is already lobbying against reductions in the federal share of the joint state—federal program.

Before hearing testimony from Congressional Budget Office Director Douglas J. Holtz-Eakin Tuesday morning, Gregg told reporters that any change in the basic structure of Medicaid "has to be done in concert with the governors." A former governor himself, he said he will "work with governors to come up with some number that's acceptable."

Gregg said, however, that the Medicaid funding level would be "more restrained than what we've seen in the past." He suggested he might consider a change in program ground rules that would "give governors more flexibility with less rate of growth in [federal] dollars."

He hinted that the more costly Medicare program may be too politically difficult to tackle this year. "The budget isn't going to drive the Medicare issue this year," Gregg said.

Gregg did say that the long-term cost of the Medicare prescription drug benefit enacted in 2003 will be a subject of debate.

On the discretionary spending side, Gregg said he expects the White House to send up "a fairly responsible defense [spending] number." The White House will be requesting $80 billion or slightly more in supplemental "emergency" spending for the wars in Iraq and Afghanistan shortly after its submits its baseline defense budget.

Gregg said it is "very much an open issue" whether Republican budget writers will include language effectively allowing oil exploration in the Alaska National Wildlife Reserve in a budget reconciliation package—which would be protected from filibusters on the Senate floor.

Holtz-Eakin discussed the CBO's latest budget and economic report with senators and reiterated his assertion that economic growth is "unlikely" to erase the expected gap between revenues and spending in the long term.

In part, he said, that is because the combined cost of Medicare, Medicaid, and Social Security will rise sharply if the growth of health care costs continues to outpace economic growth.

No 'Caps' Likely
Meanwhile, in a related development Tuesday, Mark McClellan, administrator of the Centers for Medicare and Medicaid Services, said the Bush administration will not revive its 2003 proposal to cap federal spending on so-called "optional" Medicaid populations, which include nursing home patients and certain low-income pregnant women and children in households not meeting criteria for mandatory coverage.

Under the 2003 "capped allotment" plan, states could have chosen to receive capped increases in federal outlays for optional populations each year in return for getting more federal Medicaid money up front. States showed little interest in the plan. In remarks to the AARP board of directors, McClellan said the administration would propose neither caps nor block grants, contrary to widespread speculation. "I hope people will take a close look at what the administration is saying, and not at what people are saying we're saying," he said.

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