Recent/upcoming developments… Prior to leaving for their August recess, House Republicans last week passed a “budget resolution” which initiates the partisan “reconciliation” process for passing fiscal legislation.  The House-passed budget resolution calls for $95b to address the White House supplementary funding request for the Iran war, farmer assistance, and other purposes, along with a small amount of grants to states for election integrity.  The latter is intended to be an alternative to the SAVE Act (voter ID/election integrity requirements).  Despite President Trump’s repeated calls for the Senate to use the reconciliation process for passing supplementary funding/SAVE Act, Majority Leader Thune (R-SD) and other Republicans continue to emphasize that they do not have the 50 votes that are required to do so.  Even Senate Budget Committee Chair Johnson (R-WI), who has the responsibility for assembling the budget resolution, has questioned whether the votes exist to move forward.

* There are objections among Senate Republicans to anything resembling the SAVE Act and some (e.g., Sens. Johnson, Scott (R-FL)) are insisting that any reconciliation bill be offset with controversial budget savings (e.g., “waste, fraud, abuse” reforms in Medicaid, Medicare, SNAP, other programs).  In addition, members of the Senate Appropriations Committee prefer to handle government funding, including supplementary funding, via the bipartisan appropriations process rather than the partisan reconciliation process.

* As we’ve previously noted, Republicans have for some time been contemplating possible waste/fraud/abuse reforms for inclusion in a reconciliation bill.  These include addressing “phantom” ACA enrollees, cracking down on abuses around skin substitutes and/or DME billing, and tackling fraud in home-and-community-based (HCBS) services in Medicaid (amongst others).  They have also contemplated changes to ACA cost-sharing reductions (CSRs).  Other health care reforms such as those impacting MA upcoding, site neutral and ACA have been contemplated but are unlikely to be adopted in a narrow reconciliation bill.  Republicans have also considered cost-savings from stopping improper federal payments and changes to eligibility for tax/entitlement programs (e.g., EITC, SNAP, others).

Our outlook…  Despite House passage of a budget resolution and President Trump’s repeated calls for Senate Republicans to use the reconciliation process, the probability of enactment of a reconciliation bill has declined to ~20% due to ongoing resistance from Senate Republicans.  Majority Leader Thune has said he wants to focus on passing a “continuing resolution (CR)” to temporarily fund the government past the 10/1 start of FY27 before focusing on a reconciliation bill, which pushes any consideration of the latter into September.  The closer Congress gets to the election, the less interest there will be in focusing on anything controversial, which will further diminish interest in passing a budget resolution/reconciliation bill.  To the degree that supplementary funding for the Iran war and other purposes is addressed through the bipartisan appropriations process (i.e., a CR), the probability of enactment for a reconciliation bill will further decline.

Watch for these developments… We are watching for any openness that Majority Leader Thune expresses to focusing on the reconciliation process once a CR is passed to fund the government as well as for any preparatory steps that Budget Committee Chair Johnson begins to take, as this will sustain the probability of enactment for a reconciliation bill at close to its current level.  We are also watching for any proposals that Johnson or others make for budgetary offsets in Medicaid, Medicare, SNAP, and other programs, as that will form the basis of what they ask for next year when Congress engages in negotiations over raising the debt limit.