Recent/upcoming developments… President Trump yesterday called upon Congressional Republicans to pass a bill by 6/1 under the partisan reconciliation process that funds ICE/CBP.  Speaker Johnson (R-LA) and Senate Majority Leader Thune (R-SD) issued a statement endorsing this approach to funding ICE/CBP.  Thune and other Republican leaders (e.g., House Majority Whip Emmer (R-MN)) emphasized that the bill will be narrowly focused.

Our outlook… The strategy announced yesterday by Trump, Johnson, and Thune increases the probability of enactment for a reconciliation bill that is more narrowly focused than what has been contemplated to-date, but since some Republicans will inevitably want to take advantage of the opportunity reconciliation creates to pass legislation on a partisan basis, momentum will still somewhat increase for a broader set of provisions they could seek to add to the bill.  Fiscal hawks are likely to push for the entire reconciliation bill to be fully offset (i.e., have no deficit impact) with the possible exception of stimulative provisions (e.g., issuance of stimulus checks that could have an ~$350b impact), though the probability of enactment for a provision of that nature is very low (<20%).  The following is an overview of various provisions that are likely to arise as Republicans develop reconciliation legislation.

* 50% probability of enactment… Republicans are likely to be highly unified around the following provisions that can be used to offset the ICE/CBP funding for which Trump, Johnson, and Thune are calling.

     – ICE/CBP… Republicans are reportedly considering providing between $45-75b in funding for ICE/CBP over three years.

     – ACA cost-sharing reductions (CSRs)… CSRs are subsidies under the ACA that reduce out-of-pocket costs (deductibles, copays, coinsurance) for persons buying insurance on the exchanges.  Funding these has a net savings effect ($30-50b) as it lowers premiums and therefore subsidies.

     – Waste/fraud/abuse (health care)… Recently discussed options include eliminating “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).

     – Waste/fraud/abuse (other)… House Republicans have highlighted possible areas of cost-savings from stopping improper federal payments ($160b) and changes to eligibility for tax/entitlement programs (e.g., EITC, SNAP, others).

* 30-40% probability of enactment… The following are priorities recently highlighted by Trump and Republicans, though they are outside of the scope of the narrow bill discussed this week.  Republicans are generally aligned on these issues.

     – SAVE Act (voter ID requirements)… The full SAVE Act is not procedurally eligible for inclusion in a reconciliation bill, but targeted elements of it, such as grants to states that reform their voter ID laws could be.

     – Iran/defense funding… The administration is contemplating making a request for as much as $200b in funding for the Iran war, though the pressure for spending offsets suggests that the amount of Iran funding could be closer to the $150b level included in the One Big Beautiful Bill Act (OBBBA).  The focus on Iran suggests the funding would be focused on missiles and drones.

     – Farmer assistance… Trump recently expressed support for Congressional efforts to provide farmers with $15b in additional cash assistance, something that is broadly supported by Republicans.

* 20-30% probability of enactment… The following have been visibly mentioned in various discussions among leading Republican since last year’s passage of OBBBA as potential provisions for a next reconciliation bill, though they have not received as much emphasis as the issues noted above, and Republicans are not entirely unified around a number of them.

     – HSA reforms… Republicans could return to the HSA reforms which were left out of OBBBA, including further increasing HSA contribution limits, allowing HSA dollars to be used for fitness memberships, letting working individuals enrolled in Medicare Part A make HSA contributions, and allowing HSA eligibility even if a spouse is enrolled in an FSA.

     – Tax provisions (housing, other)… House Ways and Means Committee Chair Smith (R-MO) has said that he would push for tax provisions to be included in any new reconciliation bill.  Over the last nine months, leading Republicans have mentioned a homebuyer tax credit, an increase in the limit on capital gains treatment for home sales, and other forms of tax relief as possibilities for a new reconciliation bill.

     – MA reforms… Proposals likely to include the No Upcode Act, which would exclude diagnoses from in-home health assessments and chart reviews from risk score calculations, require the use of two years of diagnostic data when calculating risk-adjusted payment rates (instead of one), and require annual recalibrations of the coding intensity adjustment.  These measures are projected to save at least $124b over 10 years.  Prior authorization reforms, such as those from the Improving Seniors’ Timely Access to Care Act, are also likely to come up.

     – Site neutral reforms… Proposals include eliminating the grandfathering for off-campus outpatient departments.  They also include extending existing site-neutral payment policies to on-campus outpatient departments and ASCs and establishing site-neutral payments for common outpatient services.  Savings estimates range from $40b to $140b over 10 years.

     – ACA reforms… They might also propose reforms to how ACA subsidies are delivered, such as moving some or all of them into Health Savings Accounts (HSAs) or into direct-to-consumer vehicles. Other possible codified reforms would support low-cost or alternative health plans, like tax parity for short-term plans, subscription-based care, alternatives to health insurance marketplaces, and catastrophic care plans.

* <20% probability of enactment… The following provisions have been visibly mentioned in various discussions among leading Republicans since last year’s passage of OBBBA as potential provisions for a next reconciliation bill, but they face various challenges (e.g., only isolated interest, significant budget consequences, procedural barriers).

     – Stimulus checks… During the latter part of last year, Trump repeatedly expressed interest in another round of stimulus checks, which if structured similarly to those issued during the pandemic, would have a budgetary impact of ~$350b.  And, many Republicans are not enthused about the concept of stimulus checks.  Trump has not mentioned an interest in this initiative for months, but could being to call for this initiative again if concern about the economy materially grows.

     – Energy infrastructure permitting reform… Republicans have repeatedly expressed interest in adding permitting reform to a reconciliation bill but it is unlikely to meet the procedural requirement that it have a primarily budgetary focus.

     – AI/social media/minors… Leading Republicans have intensified their focus on imposing a moratorium on state AI regulations and creating new protections for use of social media by minors.  There could be an effort to attach provisions of this nature to a new reconciliation bill as occurred as part last year’s OBBBA, but as in that case, they are unlikely to meet procedural requirements.

     – Tariff refunds… There has been modest Republican interest in legislation would restrict refunds for the IEEPA tariffs recently thrown out by the Supreme Court.  But given the modest interest level and likely opposition of many Republicans, this issue is unlikely to gain much momentum unless Trump pushes for it (which he has not to-date).

     – Other (remittances, litigation finance fee, other)… Some Republicans may try to revive efforts to enact provisions that were dropped from OBBBA on procedural or political grounds, such as a fee on remittances, a fee on litigation finance, among others (see this list from the Republican Study Committee (RSC) for a broad set of ideas that have gotten some attention.

     – Most-Favored Nation (MFN) drug pricing… This would include codifying part or all the deals the White House has made with drugmakers (i.e., MFN pricing in Medicaid) and/or possibly codifying MFN pricing in the Medicare program.

     – Medicaid cuts… Conservatives may push for Medicaid reforms that were omitted from OBBBA, including block-granting Medicaid or moving to a per-capita cap system, and FMAP reforms. Separately, expect an intense focus on proposals to reduce waste, fraud, and abuse in Medicaid and other safety net programs.

Watch for these developments… Trump will play a key role in establishing the scope for reconciliation legislation.  As noted, it appears at the moment that he and Republican leaders want to keep the scope narrow, but that could change, particularly if he feels funding for the Iran war is necessary, or if he decides that he needs to provide various forms of support or stimulus for voters with the midterm elections occurring this fall.  Trump is releasing his FY27 budget tomorrow, which provides an opportunity for him to articulate his policy priorities.  We are also looking for indications from Senate Budget Committee Chair Graham (R-SC) and House Budget Committee Chair Arrington (R-TX), who are responsible for coordinating the assembly of reconciliation bills, that they are open to a more broad-based approach.  Involvement of a more wide-ranging set of committee leaders (e.g., Senate Finance Committee Chair Crapo (R-RI), House Ways and Means Committee Chair Smith (R-MO)) would also suggest that the scope of the bill is broadening.