Implementing the Budget Reconciliation Spending Cuts

by Carolynn Race

In February, President Bush signed a package of mandatory spending reductions into law (PL 109-171) through the budget reconciliation process. This was the first time since 1997 that a package of mandatory spending cuts has been approved. Included in the package were $38.8 billion in cuts over five years to programs - including Medicare, Medicaid, student loans, child support enforcement, SSI, and agriculture programs such as conservation programs and crop payments. The package also reauthorized the Temporary Assistance for Needy Families Program (TANF) and included $7 billion in new revenue - to fund low-income energy assistance, extend a milk subsidy program, and increase Medicare physician reimbursement payments, among other items. The package did not open up the Arctic National Wildlife Refuge for drilling or include cuts to the Food Stamp Program. Both items were removed from the package during deliberations.

(The bill signed into law by the President was identical to the bill signed by the Senate, but not by the House. Due to a clerical error, the Senate-passed bill included language that limited rentals of most durable medical equipment to 13 months, while the House-passed bill included language stating a 36 month limit. Public Citizen has filed a lawsuit, arguing that the bill that was signed into law is invalid because both chambers did not sign the same bill. Read details about the lawsuit.

With the passage of PL 109-171, how will the mandatory program reductions and other changes impact states, localities and beneficiaries?

Temporary Assistance for Needy Families

In 1997, the 209th General Assembly of the Presbyterian Church (U.S.A.) passed a resolution on welfare reform following the 1996 legislation that changed welfare into a temporary benefit for the poor. The resolution emphasized that while the church, voluntary organizations, business, and government must work cooperatively to address the needs of poor persons and communities, government must assume the primary role in providing direct assistance for people in poverty. The resolution noted, "The church ... is called to be an effective advocate for persons in need. It must boldly raise before its members, before those who shape the economic life of its communities, and before government at all levels the need for essential services and increased employment opportunities." The resolution continued, "In all its life, the church must promote 'social righteousness' and demonstrate 'the Kingdom of Heaven to the world' by treating all persons with dignity and respect, refusing to adopt demeaning stereotypes; treating 'the alien' with justice and compassion; providing just compensation and adequate benefits to all its employees; and actively seeking social, economic, and racial diversity within its membership." (Minutes, pp. 553-560)

The 1996 welfare reform legislation expired in 2002 and continued through a series of extensions of current law. The budget reconciliation bill signed into law in February reauthorized TANF through fiscal year 2010, flat funded the TANF block grant to states at $16.5 billion per year, retains the 30-hour-per-week individual work requirement, but changed the caseload reduction credit - requiring states to have at least 50 percent of caseloads working (and 90 percent of two-parent families). $150 million per year is devoted to grants to states to promote responsible fatherhood and healthy marriage, and child care funding was increased by $1 billion, to a total of $2.9 billion per year.

Many anti-poverty advocates are concerned that the TANF changes will not improve the program. Advocates, including many faith leaders, had been calling for a large increase in child care funding to come closer to meeting the needs of families. Only one in seven children who is federally eligible for child care subsidies receives assistance.

In March 2004, the U.S. Senate overwhelming approved — 78-20 — an amendment sponsored by Senators Snowe (R-ME) and Dodd (D-CT) to provide an additional $6 billion in child care funding over five years. However, only a $1 billion increase over five years was included in the reauthorization. That amount is over $11 billion less than a Congressional Budget Office estimate of funding necessary to meet new TANF requirements and continue to serve families currently receiving assistance, adjusted for inflation. Advocates are also concerned that the new work participation rates are unattainable. Effective October 1, 2006 states will have to meet much higher work participation rates — or face penalties. The Congressional Budget Office estimated that it will cost states 8.4 billion over five years to meet the new work requirements.

Medicaid

Presbyterian General Assemblies have repeatedly called on Congress to work for health care access and affordability for all — lifting up Jesus' call that all may have life — and have it abundantly. Until such time that all have access to health care, General Assemblies have called for the strengthening of government programs that provide health care. In 1991, the 203rd General Assembly called on federal and state governments to "expand Medicare and Medicaid benefits." Currently, there are over 46 million uninsured in our nation. Medicaid provides coverage for over 50 million people, while Medicare insures 41 million.

The budget reconciliation law would make changes to Medicaid and Medicare. The Congressional Budget Office (CBO) estimated that the law will reduce federal Medicaid spending by $11.5 billion over five years and by $43.2 billion over ten years. In addition to the cuts, the law includes some spending increases, including health care relief for the Gulf Coast region impacted by the hurricanes. According to the Kaiser Commission on Medicaid and the Uninsured, "provisions related to premiums and cost sharing, benefits, and asset transfers make up about half of the savings in the [law] and have the most significant implications for beneficiaries."

Prior to the passage of the budget reconciliation bill, there were caps on co-payments for Medicaid beneficiaries. For example, states could charge co-payments of up to $3 for most clients (pregnant women and children were exempt). Under the new budget reconciliation law, states will be allowed to charge unlimited premiums and co-payments up to 20 percent of the cost of care to beneficiaries with family incomes above 150 percent of poverty (including children). Those between 100 and 150 percent of poverty could be charged co-payments up to 10 percent of the cost of care. Details about other provisions are available online. The Kaiser Commission on Medicaid and the Uninsured noted that "a large body of research ... has found that premiums and cost sharing can create barriers to obtaining or maintaining coverage, increase the number of uninsured, reduce use of essential services, and increase financial strains on families who already devote a significant share of their incomes to out-of-pocket medical expenses." The CBO estimates that 13 million (20%) of all Medicaid beneficiaries will be impacted by the cost sharing provisions by 2015.

Another new provision would require documentation for Medicaid eligibility. This July, the law will require most new applicants to show proof of citizenship in the form of a passport, driver's license, or Social Security number. Rep. Charlie Norwood (R-GA), who was the main author of the provision, said it is to prevent the "theft of Medicaid benefits by illegal aliens." Projections of how this provision will impact individuals vary. The CBO estimated that 35,000 people would lose coverage by 2015 due to this proposal, many of whom would be undocumented immigrants, but some of whom are others without access to such documentation, including homeless individuals, nursing home residents, Native Americans, and individuals born in the U.S. with no birth certificates (including many older African-Americans whose parents did not have access to hospitals). The Center on Budget and Policy Priorities estimates that three to five million Medicaid beneficiaries could be at risk of losing coverage because they do not have birth certificates or passports.

Following the passage of the budget reconciliation bill, Ron Pollock, Executive Director of Families USA, said "The draconian cuts to the Medicaid program that were passed ... will cause tremendous hardship for millions of low-income seniors, children, and people with disabilities. Those depending on Medicaid as their health care safety net will see a significant increase in their out-of-pocket expenses and, in exchange, will receive even fewer benefits. To make matters worse, many of them will completely lose all access to Medicaid for their health care services."

Other Program Spending Cuts

Additional programmatic cuts included in the budget reconciliation law include:

• A net reduction of about $12 billion from student loan programs, which, as Congressional Quarterly noted comes "mainly by reducing the amounts received by lenders and increasing some borrower costs"
• $1.5 billion in cuts to federal grants to states for child support enforcement
• Over $700 million in reductions to Supplemental Security Income (SSI) including a provision to delay receipt of SSI retroactive payments under certain circumstances
• Changes to Medicare, projected to reduce spending by $6.4 billion
• $3.6 billion in savings from increasing premiums companies pay to the Pension Benefit Guaranty Corporation
• Over $900 million in funding cuts to conservation programs, including the Watershed Rehabilitation Program, the Conservation Security Program, and the Environmental Quality Incentives Program