Budget Reconciliation: A Path to Fiscal Stability or Political Gridlock?

As the Senate and House Budget Committees begin deliberations on their Fiscal Year 2025 budget resolutions, the American Hospital Association urges Congress to take seriously the impact of reductions in health care programs, particularly Medicaid. While some have suggested dramatic reductions in the Medicaid program as part of a reconciliation vehicle, we would urge Congress to reject that approach. Medicaid provides health care to many of our most vulnerable populations, including pregnant women, children, the elderly, disabled and many of our working class.

The Senate Budget Committee Feb. 12 advanced a budget resolution focusing on the border, military and energy by a vote of 11-10. The resolution, announced Feb. 7 by Sen. Lindsey Graham, R-S.C., chairman of the committee, would authorize $85.5 billion in spending per year, to be fully offset by corresponding spending cuts. This is the first of two budget reconciliation bills the Senate hopes to enact this year, with the second focusing on extending tax cuts and cutting spending.

Meanwhile, the House Budget Committee met today to mark up their budget resolution that calls for increasing the debt ceiling by $4 trillion and allows for $4.5 trillion in spending for tax cuts. The House bill would also allocate $200 billion for border and defense spending. Additionally, it instructs seven committees to come up with no less than $1.502 trillion in mandatory cuts over 10 years. Notably, for health care, the bill instructs the House Energy and Commerce Committee to cut mandatory spending by a minimum of $880 billion. The Energy and Commerce Committee has primary jurisdiction over numerous health care programs, including Medicaid, and some proposals have been circulating that would enact significant cuts to Medicaid.

The budget reconciliation process is a critical legislative tool that allows Congress to pass budget-related measures with a simple majority in the Senate, bypassing the filibuster and expediting passage of significant legislative priorities. Established under the Congressional Budget Act of 1974, reconciliation is designed to align revenue and spending with Congress’ annual budget resolution. This mechanism is particularly valuable when one party controls Congress and the White House, as it allows major initiatives to advance without bipartisan support. However, reconciliation is subject to strict rules, including the "Byrd Rule," which restricts provisions to those with direct budgetary impacts, i.e., with direct impact on either spending or revenues.

The proposed spending cuts in the House and Senate budget resolutions, particularly the House's $880 billion target for the Energy and Commerce Committee, will significantly impact the healthcare sector, with Medicaid being the largest and most plausible target for these cuts. Medicaid is a critical program for vulnerable populations, including older adults, people with disabilities, and children who rely on it for health insurance and support in their homes and communities. The consequences of these cuts for vulnerable populations would be severe. Older adults and people with disabilities who rely on Medicaid for long-term care services and supports would be at risk of losing access to these critical services, potentially leading to increased institutionalization and reduced quality of life. Children who depend on Medicaid for health insurance coverage would also be negatively impacted, potentially leading to increased health disparities and reduced access to preventive care and treatment.

Moreover, the proposed cuts come at a time when the healthcare sector is already facing significant challenges, including an aging population and the adoption of state-of-the-art healthcare technologies, which have contributed to an increase in healthcare costs. These cuts would exacerbate these challenges and make it even more difficult for healthcare organizations to provide high-quality care to their patients.

In conclusion, the proposed spending cuts in the House and Senate budget resolutions, particularly the House's $880 billion target for the Energy and Commerce Committee, would have a significant impact on the healthcare sector, with Medicaid being the most vulnerable program. These cuts would have severe consequences for vulnerable populations, including older adults, people with disabilities, and children, and would exacerbate the challenges already facing the healthcare sector. As the Senate and House Budget Committees continue their deliberations, it is crucial for Congress to consider the potential impact of these cuts on vulnerable populations and the healthcare sector as a whole.