Budget Reconciliation FY2006: Medicaid, Medicare, and State Children's Health Insurance Program (SCHIP) Provisions

Publication Date: January 2006

Publisher: Library of Congress. Congressional Research Service

Author(s):

Research Area: Health

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Abstract:

The House and Senate approved the conference report (H.Rept. 109-62) on H.Con.Res. 95, the Concurrent Resolution on the FY2006 Budget, on April 28, 2005. The Senate Committee on Finance was instructed to meet a budget reconciliation target of $10 billion in direct spending savings over a five-year period, FY2006FY2010. On October 25, 2005, the Senate Finance Committee reported its reconciliation proposal to the Senate Budget Committee, which subsequently incorporated the proposal into S. 1932, The Deficit Reduction Omnibus Reconciliation Act of 2005. In the House, the Committee on Energy and Commerce had budget reconciliation instructions that specified a mandatory savings target of $14.734 billion between FY2006 and FY2010. The Committee's recommendations were incorporated into the House Budget Committee's bill, The Deficit Reduction Act of 2005. The House passed its version of the bill on November 18, 2005.

The Senate bill proposes changes to Medicaid, the State Children's Health Insurance program (SCHIP), and Medicare. Based on Congressional Budget Office (CBO) estimates, the largest Medicaid savings amounts are the result of changes in the reimbursement of outpatient prescription drugs. Other areas of Medicaid savings include changes to some asset transfer rules for Medicaid-eligible individuals applying for long-term care services and changes to the Medicaid program designed to combat fraud, waste, and abuse. Increases in Medicaid spending would largely result from temporary federal medical assistance percentage (FMAP) increases targeted to help Medicaid recipients from selected Louisiana parishes and counties in Alabama and Mississippi devastated by Hurricane Katrina, and also from the limiting of any FY2006-FY2007 FMAP decrease to Alaska and the re-computation of FMAPs for FY2006. The bill includes a number of Medicaid demonstration projects and some benefit and eligibility expansions. The proposal would alter the method for redistribution of SCHIP funds to the states. Medicare savings would result from changes in Medicare's Part C (Medicare Advantage) and the establishment of variations in provider payments that reflect quality differences (value-based purchasing, or "pay for performance"). The proposal would also provide for a 1% Medicare payment update for physicians in 2006.

The House bill's health program provisions are largely limited to changes in the Medicaid program. The House bill achieves its largest savings with cost-sharing and benefit changes. The bill also foresees savings from changes in prescription drug reimbursement and asset transfer rules. Increased spending provisions are focused on long-term care service benefits, the establishment of health opportunity account demonstrations, and Hurricane Katrina health program relief.

On December 19, 2006 the House agreed to a conference report on S. 1932. However, the Senate amended the report. The amended agreement passed the Senate on December 21, 2006, and was returned to the House for further action. It is expected that the agreement will be taken up in the early part of the session.