FINANCE

Instructed Savings: $100.646 billion

Achieved Savings: $106.080 billion

Summary

(SBC estimates: 5-year totals in billions of $'s)

Budget Agreement Committee Report Difference

	Budget Agreement	Committee Report	Difference
Medicare	115.000	117.800	2.800
Medicaid	13.625	16.900	3.275
Children's Health	-16.000	-16.000	0.000
Welfare/TANF	-3.000	-2.900	0.100
SSI	-9.700	-10.350	-0.650
Raise Unemployment Ceiling	0.624	0.624	0
Total Instruction*	100.646	106.080	5.434

* Figures do not add due to omission of minor provisions.

Medicare

• Medicare delivers $117.8 billion in savings relative to the baseline over five years, roughly split as follows: spending reductions ($100 billion) and Part B premium increases ($15 billion). The policy reforms reported out of the Finance Committee will result in approximately $446.2 billion over 10 years.
• The Part A or Hospital Insurance (HI) trust fund was projected in its 1997 trustees' report to go bankrupt in 2001. By virtue of the partial transfer of home health care spending ($30.7 billion rather than the $86.4 billion included in the latest Clinton budget) to the Part B trust fund (which is 75 percent subsidized by the general fund) and the policy changes made here, the Part A trust fund is projected to remain solvent to 2007. This provides the time needed to develop a plan to place Medicare on a sound, long-term financial footing.
• The committee's report institutes the Medicare Choice program. Modeled on the federal government's FEHBP program for its employees, this program is a far-reaching expansion of health care provider options that will bring Medicare into line with the innovations of the private sector -- while at the same time strengthening the traditional Medicare system.

• The Medicare Choice will allow preferred provider organizations (PPOs), provider sponsored organizations (PSOs), and point of service plans (POS) to participate along with HMOs and the traditional fee for service program in the Medicare system. Payments to the new plans would be based on those made to HMOs (with some alterations). In addition to whatever expanded benefits these particular providers choose to offer, Medicare will add the following new benefits system-wide: expanded mammography coverage, colorectal screening, diabetes self-management, and higher provider payments for preventative vaccines.
• Medicare reimbursement rates will be equalized across geographic regions. This will lead to greater penetration of health care options in heretofore underserved regions. This equalization will be phased-in and will be done in such a manner that no areas will receive a decrease in payments.
• Part B premiums are permanently set at a 25-percent rate (of the total cost of services) with the costs associated with home health services phased-in to the premium base over a seven-year period.
• Among the many payment changes, a prospective payment pricing system is instituted for home health providers, skilled rehabilitation departments, and outpatient departments.
• Among the controversial elements are: a 24-year-phase-in increase of the eligibility age from 65 to 67; a $5 home health care copayment; and means testing for wealthy individuals' deductibles under Part B.
• Medical Savings Accounts (MSAs) are allowed into the Medicare system as a demonstration program. The total number of beneficiaries was reduced from 500,000 (in the chairman's mark and in the House bills) to 100,000 beneficiaries.

Medicaid

• Disproportionate Share Hospitals (DSH -- those dealing with a number of indigent patients; this program has been a frequent source of funding abuse in the past) payments would be lowered by freezing "very low DSH" states at their 1995 levels and phasing out "high DSH" and "low DSH" states' mental health payments from their 1995 allotment amounts. Both "high DSH" and "low DSH" states would get percentage reductions from their 1995 amounts as well. Combined, these provisions save $12.6 billion over five years.
• State flexibility would be greatly enhanced in line with the national governors' request. Such flexibility has already resulted in increased coverage of individuals and cost savings to both the federal and state governments. Examples of flexibility in this bill include repeal of the Boren amendment that has resulted in frequent suits against the states, and the allowance for the Medicaid payment rate to be used as a benchmark for determining payment-in-full for Medicare beneficiaries who are entitled to Medicaid coverage of Medicare cost sharing (savings: $5 billion over five years).
• Finance did not provide any new funding to low-income Medicare beneficiaries (SLIMBs -- "slim-bees").
• Matching rate funds are increased for the District of Columbia, Puerto Rico, and other territories at a cost of $300 million over five years.

Child Health Care

• The budget agreement provided for $16 billion to be spent over five years to insure currently uninsured children. This amount was $10 billion higher than the Clinton request of $6.4 billion in his FY 1998 budget and is equal to 80 percent of the funding called for in the Hatch-Kennedy proposal. The child health care proposal was the compromise included in the chairman's mark (and was perhaps the most contentious one in the Finance Committee's markup): It would allow a state to choose between the Chafee-Rockefeller proposal to expand Medicaid coverage in this area or to accept a block grant to institute their own programs. In either case, states would be required to cover all children below the federal poverty level and up to age 19 in Medicaid, and would be required to maintain their level of spending for children's health, and Medicaid prohibitions on provider taxes and donations and other fraudulent activities would be extended to the children's health program as well. States also would be required to use 1 percent of the new funds for Medicaid outreach. States would be allowed to provide 12 months of continuous Medicaid coverage for children. (An amendment to make the Chafee-Rockefeller proposal the sole proposal was defeated 9-11.)

Welfare

• Supplemental Security Income (SSI): The committee reported $10.35 billion to restore SSI and Medicaid benefits for disabled legal noncitizens (including the elderly disabled) who are currently enrolled (or will be enrolled) in the SSI program prior to September 30, 1997. This amount includes the Medicaid costs (function 550) and is $650 million above the reconciliation instructions.
• Welfare to Work: The committee reported $2.9 billion for the TANF (welfare to work block grant) over the next four years to be distributed through a targeted formula.
• Unemployment Insurance: The committee reported $624 million to increase the ceiling of the federal FUTA-funded accounts in the Unemployment Trust Fund to increase solvency.

• Raise Unemployment Ceiling: The committee reported $1.38 billion in savings.

GOVERNMENTAL AFFAIRS

Instructed Savings: $5.467 billion

Achieved Savings: $5.527 billion

The Committee exceeded its reconciliation instructions, reducing budget outlays in FY 1998 by $632 million and by $5.527 billion over the five-year period ending in FY 2002. The plan would make the following changes:

• Increased Agency Contributions to Civil Service Retirement and Disability Fund: All agencies would be required to increase their payment to the Civil Service Retirement and Disability Fund for their employees enrolled in the Civil Service Retirement System (CSRS). For the four fiscal years 1998 through 2001, contributions are increased by 1.51 percent. For FY 2002, the contribution is increased to 1.6 percent. The policy change under the agreement totals savings of $2.933 billion over five years.
• Increased Employee Contributions: All employees participating in CSRS and the Federal Employees Retirement System (FERS), including congressional, U.S. Postal Service, and judicial employees, will pay an increased contribution rate in 1999 by .25 percent; an additional .15 percent in 2000; and by an additional .10 percent in 2001. The cumulative increase of .5 percent will remain in effect through FY 2002. Agencies are not required to make the increased employer contribution to FERS. This policy under the agreement totals $1.829 billion over five years.
• Repeal of Postal Transition Payments: The permanent authorization of transitional appropriations for the U.S. Postal Service workers compensation would be repealed. The cost in 1998 is $35 million, with the amount decreasing in future years. It has been determined that it is time to transfer responsibility for the fund to the Postal Service. The five-year savings is $165 million.
• GSA Property Sales: The Administrator of GSA is required to sell Governor's Island, New York, at fair market value, with the State and City of New York being given the first offer to purchase. This area has been vacated by the U.S. Coast Guard. CBO has scored the sale at $500 million. The Administrator is also required to sell the 16.3 acres of "air rights," or air space, above train tracks north of Union Station in Washington, D.C. The air rights currently are owned by the Department of Transportation and AMTRAK. CBO has scored this sale at $40 million.
• Federal Employees Health Benefits (FEHB): Authorizes a "Fair Share formula" to replace the Big-6 Phantom formula that had been authorized by Congress since 1989 and expires in 1998. The Fair Share formula sets the government's contribution at 72 percent of the weighted average of the premiums of all plans in the program, and maintains the cap of 75 percent for any particular plan. CBO scored the savings of $28 million over five years.

LABOR AND HUMAN RESOURCES

Instructed Savings: $1.792 billion

Achieved Savings: $1.792 billion

• Recalls $1.028 billion in excess agency reserves. The committee requires each Guaranty Agency to deposit its share of the total excess reserves into a newly created restricted account in annual payments over the next five years. In the year 2002, the $1.028 billion within the reserve accounts will be deposited directly to the Treasury.
• Eliminates the Direct Lending Loan Origination Fee for savings of $160 million. The committee's proposal repeals the provision authorizing the federal payment of $10 per loan to schools and/or alternate originators who make direct loans. This repeal extends for five years a provision currently contained within the FY 1997 Labor, HHS, Education and Related Agencies Appropriations bill.
• Reduces expenditures for Department of Education administrative expenses associated with the direct lending program as well as the administrative cost allowances paid to guaranty agencies for administration of the guaranteed loan program. This proposal reduces section 458 expenditures to conform with anticipated needs, resulting in savings of $604 million over five years.

VETERANS' AFFAIRS

Instructed Savings: $2.733 billion

Achieved Savings: $2.733 billion

The Committee approved the following package that would:

• Renew the Department of Veterans Affairs' authority to recover private health insurance proceeds and to charge copayments for prescription drugs, hospital stays and other services, and authorize the VA, for the first time, to retain such proceeds for the financing of veterans' health care. Estimated savings: $641 million over five years.
• "Round down" to the nearest dollar the annual cost of living adjustment (COLA) in benefits for disabled veterans and their dependent survivors, saving $391 million.
• Extend previously increased home loan fees, create new fees for VA financing of home purchases, and extend previously enacted property management provisions. Estimated savings: $934 million over five years.
• Extend VA authority to IRS data to assure eligibility for "means-tested" benefits. Savings: $40 million over five years.
• Limit VA payments of pension benefits when a veteran is in Medicaid-financed nursing home care. Savings: $637 million over five years.
• Authorize the VA to withhold from tax refunds and federal salaries in order to collect debts on defaulted home loans. Savings: $90 million in FY98.

Some Quick Highlights For Floor Consideration of Reconciliation Bills

• The motion to proceed to the consideration of a reconciliation bill is not debatable.
• Per the Congressional Budget Impoundment and Control Act of 1974, as subsequently amended, floor debate on the Senate reconciliation bill totals 20 hours, equally divided between Republicans and Democrats.
• Time spent on quorum calls (unless preceding a vote) is counted against the debate time, but votes are not counted against the time limit.

There is a two-hour time limit on all amendments offered in the first-degree; and that time must expire, or be yielded back, before a second-degree amendment can be offered to the pending first-degree amendment.

There is a one-hour time limit on all second-degree amendments.

Any debatable motions or appeals of the Chair's ruling also carry a one-hour time limit.

Time on all the preceding is equally divided, and is subtracted from the bill. In an ideal world, this would mean that proponents and opponents agree to use the same amount of time on each amendment or motion, up to the maximum allowed. But in the world of U.S. budget process, it also means that if proponents use one hour on a first-degree amendment, but opponents only use 10 minutes, then yield back time, the total time -- 70 minutes -- is equally divided, and 35 minutes are subtracted from the bill time on each side.

If neither side yields time (i.e., if no one is conducting any business on the bill, but no quorum call is in progress), the Chair has the right to charge time equally from both sides.

How To Tell If Your Amendment is in Order

Amendments to a reconciliation bill must be germane, otherwise a 60-vote point of order could be raised. Under the precedents of the Senate, germaneness is a more narrow concept than "relevance," which only requires a subject matter relationship. The following types of amendments are per se germane:

Committee amendments;

Amendments to strike;

Amendments to change numbers or dates; and

Non-binding amendments limited to matters within the jurisdiction of the committee of the reported bill; however, all amendments of this nature would violate the Byrd rule and be subject to a 60-vote point of order.

For any amendment that does not fall into one of the categories above, germaneness is determined on a case-by-case basis by the Parliamentarian. But, in general, the amendments:

Must be relevant; and

Must substantively restrict or limit some power, authority, duty, class, or other provision of the underlying bill or amendment.

All amendments must be offset and germane in order to avoid a Budget Act point of order. However, motions to strike are always in order.

Amendments are not in order to the reconciliation bill if they reduce any specific budget outlay below the level provided or if they reduce revenue increases below the level provided -- unless the amendment makes a reduction in other specific outlays, an increase in other specific revenues, or a combination thereof that is at least equivalent to the outlay increase or revenue decrease in the amendment. Otherwise, the amendment would be subject to a 60-vote point of order.

Employing the Byrd Rule

An amendment to the Budget Impoundment and Control Act enacted in 1985 offers some protection to reconciliation bills from the inclusion of "extraneous" material. This rule, named after its primary sponsor, Senator Robert C. Byrd (D-WV), applies the following rules (in addition to the preceding ones pertaining to germaneness) to remove material from a reconciliation bill when it is being considered on the floor. Under Byrd Rule procedures, it also applies to reconciliation conference reports. The Senate Budget Committee is obliged to report to the Senate a list of extraneous provisions.

If a Byrd Rule point of order against a provision in the bill is sustained, the offending provision is stricken from the bill. A waiver of the Byrd Rule requires 60 votes. Material is considered extraneous if it:

Doesn't change outlays or revenues (unless it is a term or condition of a provision that does produce such a change);

Increases the deficit if the committee has failed to meet its instruction;

Is a provision from a committee which has no jurisdiction over the provision;

Would produce changes in outlays or revenues which are incidental to the non-budgetary components of the provision;

Creates a net outlay increase or a revenue decrease in the year following the scoring window (i.e., any year beyond FY 2002); or

Affects the receipts or outlays of the Social Security trust fund.

Note that eight committees were given reconciliation instructions. Each committee had amendments offered in its particular markup -- for example, 263 amendments were submitted in the Finance Committee. In addition, members of the Budget Committee can be expected to offer amendments on the floor. For this reason, it is impossible to provide a comprehensive list of possible amendments. Staff concerned with particular areas would be best advised to contact the committee of jurisdiction for amendments in their area of concern. Below is a partial list of probable amendments. In addition to amendments, it is anticipated that points of order will be raised against provisions in the bill thought to violate the so-called "Byrd rule" (see Floor Procedure section, above, for details). If such a point of order is raised, and if upheld by the chair, 60 votes are required to overrule it.

Domenici. To extend existing budget enforcement mechanisms.

Domenici. To achieve full savings instructions in the jurisdiction of the Commerce Committee.

Craig. Change existing budget rules by establishing a Budget Act point of order against using a tax increase to offset new mandatory spending.

Abraham. Require revenues in excess of projected levels to be used for tax reductions.

Frist. Create a point of order against actions that would result in a deficit after FY 2002.

Gramm. Allow discretionary cuts to offset tax cuts under the budget rules.

Kennedy. Increase cigarette tax by 23 cents per pack with proceeds going to uninsured children.

Kyl/Wyden. Gag rule

D'Amato. Patient Protection Act

Wellstone. (His two likely amendments were unknown at press time.)

Wellstone.

Additionally, the following amendments are anticipated, but sponsors are unknown:

Fully restore coverage for legal immigrants in the U.S. prior to August 23, 1997, but who become disabled after that date.

Add Medicaid relief for Puerto Rico and the District of Columbia.

Add $1.5 billion to cover increased premium costs on low-income Medicare beneficiaries (SLIMBs).

Impose SSI administrative fee on states per budget agreement.

Motion to strike change in Medicare age from 65 to 67.

Change means testing of Medicare deductibles to means testing of Medicare premiums.

Motion to strike means testing for Medicare.

Staff Contact: Dr. J.T. Young, 224-2946

[See attachment: Deficit Comparison]

TABLE 1 - Deficit Stream Comparison
	1997	1998	1999	2000	2001	2002	2003	2004	2005	2006	2007	Total
Baseline Deficit	67.2	89	109.1	121.3	94.5	104.9	103.2	108.6	133.3	127.8	117	1108.6
Fiscal Dividend		1	4	13	24	34	41.8	48.7	55.6	62.8	70.2	355.1
Actual Deficit	67.2	90	113.1	134.3	118.5	138.9	145	157.3	188.9	190.6	187.2	1463.8
Agreement Deficit	67.2	90.4	89.7	83	53.3	-1.3	-4.6	-19.8	-23.9	-29.5	-34.4	202.9
Deficit Difference	0	0.4	-23.4	-51.3	-65.2	-140.2	-149.6	-177.1	-212.8	-220.1	-221.6	1260.9