The House GOP has threaded the needle – so far – on budget reconciliation
The House threaded the needle and passed the budget reconciliation bill on a tight 215 to 214 vote Thursday morning, meeting a self-imposed objective by the House GOP leadership of before the Memorial Day weekend. But based on what has occurred and the major fissures that have erupted, quick passage of a final congressional bill is some time off.
This week’s developments — Trump intervenes
After conservatives initially tanked the bill in the Budget Committee on Friday and voted present on Sunday to advance the bill, President Trump visited the House GOP caucus on Tuesday to urge holdouts to support the package.
Trump pushed moderate Republicans from blue states to give up their fight over additional SALT deduction concessions, while warning conservative members not to “f‑‑‑ with Medicaid” as some lawmakers eyed further changes to the program. He said Republicans could fight for SALT later and that he does not want to touch Medicaid except for eliminating waste, fraud, and abuse, eliminating those on the rolls who entered the country illegally, and instituting work requirements.
Trump’s appearance, some backroom arm-twisting, some concessions, and an appeal to party unity won the day. On Wednesday, two House Republicans voted against the bill, and one voted present to get the bill to pass in the full House.
The conservative concessions
House conservatives in the Freedom Caucus remained concerned about the overall small levels of reductions in the mammoth bill and lack of structural change to Medicaid. Specifically, they complain spending reductions are backloaded, while tax decreases and extensions and some spending reductions are front-loaded. In truth, they are being somewhat consistent as deficit hawks here. The conservatives wanted additional Medicaid structural changes and accelerated reductions. They obtained an acceleration of work requirements from 2029 to essentially 2027 (by 12/31/2026). It is likely impossible for states to do that so quickly. They also wanted further provider tax reform and a lowering of state reimbursement for the expansion population. They did not get these.
The moderate concessions
Moderates andswing districtGOP lawmakers tend to overlap a great deal. And many are in blue or bluish states where many residents rely on Medicaid. Democrats are already targeting many of these districts for flipping and a vote on major Medicaid cuts could be devastating for the GOP members.
Some moderates have gotten comfortable with the idea of work requirements and some of the eligibility changes. But some remain concerned there as well as on provider tax restrictions.
The moderates too want a more generous cap on state and local tax (SALT) deductions. But that is costly, and conservatives are demanding added spending reductions to offset the major cost.
House moderates cut a deal to further raise the state and local tax (SALT) deduction limit put in place in 2017, but watering down Medicaid reductions did not occur. The SALT ceiling was lifted to $40,000 and phase out for incomes over $500,000. In the end, the moderates hope voters like a greater SALT deduction and will ignore any Medicaid coverage impacts caused by the bill. Some of the cuts won’t even be on line before the 2026 election and some could be blamed on states or other forces.
The conservatives received some more spending cuts to close the increase in the deficit created by the last-minute SALT change.
Each side was told that was it and they must support the bill given the importance to the GOP and the nation.
On to the Senate
Now, the Senate must grapple with passing the bill. It is philosophically opposed to the bill’s mammoth nature. The Senate has always wanted to break up the bill into two or more bills and could do so because of the challenges. They argue this will allow key spending and tax cuts to pass more quickly and not drag on into the fall.
It is also struggling with a philosophical divide as well. There are between 5 and 7 moderates or pragmatic conservatives who right now are very concerned about the level of Medicaid and other cuts. Moderates Susan Collins and Lisa Murkowski as well as conservative Josh Hawley all have issues with Medicaid cuts. There are others with concerns. Most can stomach Medicaid work requirements, but others are concerned about the impact to reimbursement to states and the impact on coverage, especially related to provider tax reform.
But Senate conservatives argue like the House conservatives that there are not nearly enough cuts. The GOP likely has a solid no vote in deficit hawk Rand Paul of Kentucky. He will hate the deficit impacts. The overall package adds $2.3 trillion over the 10-year horizon to the national debt. The tax cuts themselves add about $3.8 trillion before offsets.
Back to the House
If the Senate were to pass the bill with lower cuts, it throws the outcome in the House very much in doubt. House conservatives could dig their heels in if the projected deficit and debt blossoms in the Senate bill. The government runs out of money sometime in July. Conservatives want any debt cap lift or higher threshold tied to sufficient spending reductions. Some Senate budget hawks might agree, too.
So, while House leaders say they hope to pass the bill before Memorial Day, betting odds are that things go well into the summer before any bill is agreed to. After all, the House GOP can have no more than three no votes and the Senate GOP no more than four.
What is in the bill?
For the record, here is what is in the bill now in terms of Medicaid cuts. My primary source is healthcare policy group KFF briefers:
- Mandating that adults who are eligible for Medicaid via an expansion meet work requirements.
- Repealing the Biden administration’s rule simplifying Medicaid eligibility and renewal processes.
- Frequent eligibility redeterminations (every six months) for expansion group populations.
- Establishing a moratorium on new or increased provider taxes as well as state directed payment limits.
These large items above account for over 90% of Medicaid savings.
Other changes include:
- Expiration of the enhanced premium subsidies in the Exchange.
- Cost-sharing for expansion populations.
- One-month retroactive period for eligibility.
- Reduction of the expansion match rate from 90% to 80% for states that use their own funds to provide health coverage or financial assistance to purchase health coverage for individuals who are not lawfully residing in the United States.
- Requires the HHS Secretary to certify 1115 demonstration waivers are not expected to result in an increase in federal expenditures compared to federal expenditures without the waiver and to specify a methodology for applying any budget neutrality “savings” in a waiver extension period.
- Nursing staffing rule repeal.
- Pharmacy benefits manager reform, including a ban on spread pricing in Medicaid and greater transparency in Medicare.
KFF finds that Medicaid reductions amount to about 20% of state financed Medicaid per resident. States have unequal impacts, and a lot is dependent on how each state responds to the changes and reductions from a policy and budget perspective. KFF says impacts range from 6% to 50% per state.
Affordable Care Act (ACA) reductions include:
- Barring most legal immigrants from premium tax credits.
- Rescission of the cap on premium repayment.
The bill also restores appropriations for cost-sharing reduction (CSR) subsidies in the Exchanges. This actually will reduce overall government costs as premium subsidy costs will drop when so-called “Silver loading” ends. Plans must have CSR offerings and they increased premiums in Silver products when CSR appropriations ended under Trump 45.
On the positive side, Medicare docs get some rate relief. The bill replaces the current schedule of annual statutory increases to the Medicare physician fee schedule conversion factor with annual increases tied to the Medicare Economic Index (MEI), a measure of inflation in medical practice costs. The conversion factor will be increased by 75% of the projected increase in the MEI in 2026, and by 10% of the projected increase in the MEI in all subsequent years. But, while this is relief in the short term for doctors, it is not a real permanent fix to the formula.
Not talked about much is the budget reconciliation bill’s efforts to rebrand Trump’s earlier push to promote individual coverage subsidies (known as IHCRA) and expand Health Savings Accounts (HSAs) and High Deductible Health Plans (HDHPs).
Sequestration provisions
There are also potential sequestration impacts. The Congressional Budget Office (CBO) informed lawmakers shortly before the bill was voted on that healthcare programs could possibly face hundreds of billions in reductions through sequestration.
Existing law sequestration provisions could trigger future healthcare cuts beyond what are strictly outlined in the bill. The CBO estimates that an average annual increase of $230 billion in the deficit will occur each year under the legislation. This could result in the need to reduce spending by that amount annually. That could begin as early as federal fiscal year (FFY) 2026. The reductions are dependent on a number of parameters or triggering events. They could be overridden in the future.
Medicare is clearly impacted and in scope for sequestration, but Medicaid is not. Medicare cuts are limited to 4% per year, but that could mean about $45 billion in cuts for FFY 2026. Total cuts to Medicare could be about $500 billion in the 10-year horizon.
#budgetreconciliation #trump #congress #medicaid #coverage
— Marc S. Ryan
