October 25, 2005

Senate panel backs $10 billion in health care cuts

By Donna Smith

WASHINGTON (Reuters) - The Senate Finance Committee on
Tuesday approved $10 billion in Medicaid and Medicare savings
as part of a broader effort by congressional Republicans to
trim spending and approve additional tax cuts.

Senate Finance Committee Chairman Charles Grassley, an Iowa
Republican, said the bill's savings would affect the health
industry and not beneficiaries. The bill, approved by an 11-9
party line vote, would improve health care access for children
and low-income beneficiaries, he said.

But Democratic opponents said they are worried the emphasis
would shift to beneficiaries later in the legislative process
when the Senate and House of Representatives try to work out

"I am concerned about the fate of the bill," said Sen. Max
Baucus of Montana, the top Democrat on the panel. "Although
many of its policies are sound, I am not confident that most
will survive a conference with the House."

Grassley said the full Senate could take up the measure as
early as next week.

The legislation is part of a broader effort in the Senate
to cut spending by about $35 billion over five years with most
of the reductions from health care and other mandatory
programs. But conservatives are pushing for even bigger savings
throughout a greater number of government programs.

Meanwhile House Republicans are pushing for a bigger $50
billion spending cut package to help cover the $62.3 billion in
emergency aid for victims of Hurricanes Katrina and Rita while
helping to finance additional tax cuts.

The second part of a budget agreement approved earlier this
year calls for $70 billion in tax cuts.

Baucus also objected to Congress acting first on the
Medicaid and Medicare cuts before acting on legislation to
provide temporary health care coverage for Katrina and Rita

Grassley said the bill approved by the Finance Committee on
Tuesday includes a "down payment" on help for storm victims.

Baucus and other Democrats expressed dismay that two months
after the storm Congress had yet to act on the health care
package for Katrina victims and that time was running out.

"I worry that it is not a down payment, it is a last
payment," he said.

Much of the savings from the Medicaid health program for
the poor come from a new formula for paying pharmacists who
dispense generic drugs to beneficiaries. It also increases
rebates some drug makers pay to states.

The generic drug industry said the changes could force many
generic drug manufacturers out of the program, a development
that would end up costing the government more because generics
cost much less than brand drugs.

In a letter to the committee the Generic Pharmaceutical
Association said generics account for more than half of the
drugs used in the Medicaid program, but account for only 16
percent of the expenditures.

The biggest savings in Medicare come from two funds meant
to encourage private managed care plans to take part in the
elderly health care program. The committee rejected an effort
by some Republicans to restore the money.