Why can't the republicans just get along?

Two surprising events occurred on Capitol Hill as Congress struggled--unsuccessfully--to pass a budget this fall. On November 17, a majority in the House of Representatives rejected the conference committee report that covered appropriations for the Department of Health & Human Services (HHS). Shortly afterward, Republicans in the House squared off against republicans in the Senate on language affecting long-term care in competing versions of the oddly named Deficit Reduction Act of 2005.

These sound like arcane details of the legislative process--and that is exactly what they are. However, the two events imply a great deal about the dynamics of healthcare policy at a time when the Bush administration has apparently lost the ability to control its own party members' agenda on domestic issues.

The November 17 House vote on the HHS appropriations has been described by the conservative "losing side" as a victory of pork over policy, kowtowing to the election needs of desperate GOP moderates. As always, the House and the Senate had passed slightly different versions of the appropriations bill, which funds health programs for the current fiscal year (FY 06). In recent years, the legislative process for this has been seized by many lawmakers as an opportunity to insert hundreds of "earmarked" projects into the legislation (see "You're Not Invited to the Pork Fest," February 2004, p. 10). These projects, chosen usually for political or personal reasons by individual congressmen and senators, have annually totaled hundreds of millions of dollars. Pork-barrel spending of this magnitude meant that almost all "discretionary" grants offered by HHS agencies were devoted entirely to funding a congressional wish list.

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This year, though, the Republican majority on the joint conference committee decided to break with these trends. Although they voted to support an appropriation that reflected a 30% increase in spending on entitlement programs such as Medicaid and Medicare, in an attempt to limit growth of the federal deficit, the members reduced the levels of all other HHS spending. By definition, this cut drastically into federal appropriations specifically earmarked by individual congressmen.

When the joint conference report was submitted for a roll call vote, it was assumed (correctly) that most Democratic House members would vote against it because it provided too little funding to address the healthcare needs of low-income Americans. It also was assumed that nearly all Republicans would support the recommendations and, since there are 231 Republican House members and only 202 Democratic members, the bill was expected to pass. Instead, nearly 10% of the Republicans voted against the bill and the appropriations were defeated by a 22-vote margin.

Most Republicans who voted against the appropriations bill are moderates who may be facing difficult reelection contests in 2006. Many claim that they object to any cuts in healthcare spending when an ever-larger number of Americans are living without health insurance. To their conservative colleagues, their real objection is to the "lean pork content" of the legislation. These Republicans believe that Congress, to reduce the deficit, must decide between lowering spending levels or increasing taxes--and, as Republicans, when it comes down to a hard-and-fast choice, increased taxes are too high a price to pay for pork benefiting individual members.

However, it is the Deficit Reduction Act of 2005, also known as the Deficit Omnibus Budget Reconciliation Act of 2005 (S 1932), that has a potentially greater impact on nursing homes than the defeated HHS appropriation. Section 6012 of the bill expands the ability of state governments to partner with the private sector on long-term care coverage. It would permit more states to allow up to $250,000 of personal assets to be excluded from Medicaid eligibility calculations when a nursing home resident has been covered by a qualified private long-term care insurance policy. Its purpose is to encourage individuals to purchase long-term care coverage with the expectation that they may end up relying on Medicaid reimbursement after they have expended their insurance benefits. In the long run, these "partnerships" are designed to reduce long-term providers' dependence on Medicaid reimbursement for the care of millions of middle-class retirees.

Section 6011 of the Deficit Reduction Act, which would reform Medicaid asset transfer rules, is much more controversial. Federal law provides that certain transfers of assets or income, known as divestment, can affect a person's eligibility for Medicaid-reimbursed nursing home or home-/community-based services. The look-back period bearing on eligibility is 36 months before the individual's first application for Medicaid. A longer look-back of 60 months applies to divestments involving trusts. Both the Senate and House versions of Section 6011 would extend the look-back period to five years for all types of divestment. This change was favored by bipartisan members of the National Governors Association to limit access to Medicaid by relatively well-off families who engage in estate planning to gain access.

The controversy about this lies in a proposed change in how Medicaid calculates the penalty period for divestment. The "penalty period" is the length of time that Medicaid will refuse to pay nursing home expenses of an individual who has transferred assets within the look-back period. The length of the penalty period varies with the amount of assets transferred: In general, the more assets transferred, the longer the penalty period. The recently convened Medicaid Commission estimated that an early enough start date for the penalty period would save federal and state governments approximately $1.4 billion over five years.

Unfortunately, under the House bill, these "savings" would come out of the pockets of nursing homes in the form of unreimbursed care. Recognizing this, Sen. Gordon Smith (R-Oregon) has led an effort in the Senate to keep any penalty period change out of the Deficit Reduction Act. While House Republicans contend that healthcare providers that receive much of their earnings from Medicaid should "share the burden" of reducing the federal deficit, Smith argues that the government orders no other private-sector businesses to provide services without an expectation of payment. Smith and like-minded Senate colleagues do not believe that deficits are a justification for insisting that a single category of largely for-profit businesses--long-term care providers--donate their services to the poor.

Normally when a single political party controls the White House and both legislative chambers, the President is expected to settle disputes among his congressional allies. This has not happened during this strange period of GOP warfare. As of the end of 2005, the White House remained oddly aloof from the debates described here. Admittedly, some Republicans see President Bush as a political liability rather than an asset, without sufficient political clout to give victory to either the antispending hawks or to moderates like Smith. The almighty "party in power" is playing a high-stakes game in Election 2006, and the financial fate of long-term care providers is one of the chips.

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