Bush's budget will seek savings from Medicaid

WASHINGTON -- President Bush is readying a new budget that would carve savings from Medicaid and other benefit programs, congressional aides and lobbyists say, but it is unclear if he will be able to push the plan through the Republican-run Congress.

White House officials are not saying what Bush's $2.5 trillion 2006 budget will propose saving from such programs, which comprise the biggest and fastest growing part.

But lobbyists and lawmakers' aides, speaking on condition of anonymity, say he will focus on Medicaid, the health-care program for low-income and disabled people. Medicaid costs are split between Washington and the states.

Many expect him to propose giving states more flexibility in using the $180 billion in federal Medicaid funds each year, but to limit the program's growth on a per-patient basis -- in effect forcing the states to find ways to save money.

Bush may also propose trimming doctors' reimbursements or weeding fraud from Medicare, the health insurance system for the elderly and disabled, the aides and lobbyists said.

He may seek savings from agriculture and other benefit programs as well in the spending blueprint he will send to Capitol Hill on Feb. 7.

There has not been a serious effort to pluck savings from such programs -- called entitlements because the benefits go automatically to anyone who qualifies -- since 1997.

Record deficits

After two straight record federal deficits that peaked at $412 billion last year, many Republicans are eager to constrain government spending by curbing the growth of benefits. By law such programs, which consume nearly two-thirds of the budget, grow to keep pace with inflation and ever-larger numbers of recipients.

Conservatives -- including the chairmen of the House and Senate budget committees, Rep. Jim Nussle, R-Iowa, and Sen. Judd Gregg, R-N.H. -- may want to go even further than whatever savings Bush proposes. Many of them consider Bush's goal of halving the budget deficit by 2009 too timid, and see the coming retirement of the 76 million baby boomers as threatening to snowball federal spending.

"There's this demographic tidal wave coming at us," Gregg said in a recent interview. "We've got to adjust our retirement structure to maintain a strong program for retirees" while making sure younger people won't "be taxed to the point where their lifestyle is significantly reduced."

Other Republicans, recalling past Democratic attacks when such programs were targeted, are wary. Veteran Rep. Christopher Shays, R-Conn., said many lawmakers would support such cuts if they would balance the budget in the short term but would be unwilling to "take a big hit" for incremental deficit reduction.

By proposing an overhaul this year of Social Security, the biggest benefit program at more than $500 billion annually, Bush has asked GOP lawmakers to risk angering senior citizens worried about the retirement and pension program.

Simultaneously pursuing savings from other programs would only increase many legislators' heartburn.

They would face the wrath of doctors -- major GOP contributors -- should Bush propose limiting the Medicare payments physicians receive. Governors of both parties are already trying to head off any effort to trim Medicaid, while farmers, veterans and other groups would be sure to combat any efforts to curtail their benefits.

"It's obviously going to be a very difficult lift," Nussle said recently.

"Everyone has a program, everyone has a constituency, everyone has a point where they lose their courage to reform a government that is too big," he said. "Republicans need to wake up. You can't have tax cuts without spending restraint and get to a balanced budget."

Among the fastest growing benefits is Medicare, which increased by an estimated 8.1 percent last year and is projected to pass $320 billion this year. Bush is considered unlikely to seek major savings from a program to which he and lawmakers added expensive prescription drug benefits less than two years ago.

According to Congressional Budget Office estimates last fall, Medicaid spending grew by 9.4 percent while Social Security costs expanded by 4.5 percent.

The budget office projected last September that this year's deficit will hit $348 billion, and stay in the $300 billion range through 2010. The office plans to release its newest estimates on Tuesday.

In 1997 President Clinton and the GOP-run Congress enacted a compromise aimed at balancing the budget in five years. Most of the $130 billion in five-year savings came from reducing health providers' Medicare reimbursements.

That deal capped two years of battling in which Democrats criticized then-House Speaker Newt Gingrich, R-Ga., for proposing Medicare savings. Republicans suffered losses at the polls due to that clash, and Gingrich said in an interview this week that for Bush to prevail this time, he will have to persuade voters to support his proposed savings.