The tough FY 06 budget calls for cuts in most discretionary programs, as well many entitlement programs. Specifically, House and Senate lawmakers have been charged with cutting some $10 billion or more from the Medicaid program. Yesterday, National Governor's Association Chairman Mark Warner (D-VA) and Vice Chairman Mike Huckabee (R-AK) presented their proposals for reform. These proposals are intended to provide Congress with a blueprint as lawmakers work to implement legislation to reduce Medicaid spending. The proposals suggest improvements to reduce the cost of prescription drugs by increasing rebates from manufacturers, reforms to the Average Wholesale Price system, policies to increase generic drug use, and tiered copayments. In addition, the NGA plan suggests closing loopholes that allow some people to hide or transfer assets to qualify for Medicaid long-term care benefits, increasing cost-sharing for beneficiaries, and implementing judicial reforms to allow states to "locally manage the optional Medicaid categories." Sen. Max Baucus (D-Mont.), ranking member on the Senate Finance Committee, expressed concern about increasing cost-sharing, saying in his opening statement before the committee, "Onerous cost-sharing requirements can harm access to care. While personal responsibility is important, we should not place unduly high barriers to access through changes in cost-sharing." Congress appears to be a long way from agreement on how to go about reforming Medicaid. The governors have long supported efforts to save more money on prescription drugs; to close loopholes that let people shelter assets to qualify for Medicaid-covered nursing home care, and to encourage the purchase of private long-term care insurance. More contentious are proposals to allow states to require patients to pay for more of their care and what the proposal refers to as "judicial reforms" that would shield states from lawsuits when they change Medicaid programs; both of concern to consumers and consumer advocates.

On Tuesday, there was a hearing before the Senate subcommittee on Federal Financial Management, Government Information, and International Security (a subcommittee of Homeland Security) on performance measures and how they are used in the federal budget process. Dr. Beryl Radin, who has worked extensively on PART and other government performance and management issues, testified before members of the committee, specifically Sens. Carper (D-DE) and Coburn (R-OK). Her testimony can be read here.

The full Senate Appropriations committee is scheduled to mark up the Homeland Security spending bill today. On Tuesday, the Appropriations subcommittee on Homeland Security reported the bill, and approved $30.8 billion in discretionary funding for FY 06. Excluding emergency funding and the $2.5 billion in advance appropriations for Project BioShield, the Senate's Homeland Security spending bill weighs in at $1.4 billion more than the FY 2005 enacted spending level, and $1.2 billion more than the administration's request. The House finished work on DHS appropriatons in May, increasing spending $1.37 billion above the FY 05 enacted levels (excluding $2.5 billion in advance appropriations for BioShield), and $1.3 billion above the President’s request.

A number of important hearings have taken place this week. Yesterday, the House Ways and Means subcommittee on Social Security held a hearing examining the impact of the American population’s increasing longevity on Social Security’s finances and exploring ways to encourage work at older ages. Members of the panel heard a range of proposals to address the impact of longer-living individuals on solvency. Witness testimonies can be read here. Also, this morning the Senate Budget committee held a hearing on the solvency of the Pension Benefit Guaranty Corp., which we wrote about in our last issue of the Watcher. The committee heard from Bradley Belt, Director of the PBGC, and CBO head Douglas Holtz-Eakin. The hearing was held because it is clear the defined-pension benefit system needs to be reformed. Rep. Boehner has offered a bill (HR 2830) to overhaul the pension system; however his bill has been criticized by both Republicans and Democrats. Boehner's bill raises pension insurance premiums that companies pay from $19 to $30 to ensure that the PBGC does not need a taxpayer bailout.