Senate move on Medicare payments sets up pay-go showdown with House

Already at odds over healthcare, the Democratically controlled House and Senate are now on a collision course over legislation to require both chambers to pay for everything they pass.

The Senate is looking to quickly move legislation costing more than $200 billion over 10 years that would adjust Medicare reimbursement rates for doctors, but it does not plan to pay for the bill with offsetting spending cuts or tax increases.

The move tests the will of House leaders on pay-go and sets the stage for a standoff that could come in advance of what is already sure to be a difficult healthcare reform conference.

A pay-as-you-go statute, which has long been a dream of the conservative Blue Dog Democrats, has been embraced by House Democratic leaders and backed by President Barack Obama.

But leading Democrats in the Senate have labeled it an impossible lift. And they’ve compounded the frustration of Blue Dogs by regularly taking up House-passed bills containing offsets and sending them back to the House stripped of their pay-fors.

In April, House leaders drew up what they believed was a foolproof plan to force the Senate not just to stop this practice, but also to swallow legislation turning pay-as-you-go — or “pay-go” — rules into a law.

As part of an agreement on the budget, Speaker Nancy Pelosi (D-Calif.) and Majority Leader Steny Hoyer (D-Md.) in April sent a letter to House Budget Committee Chairman John Spratt (D-S.C.) — also intended as a warning shot to the Senate — vowing to attach statutory pay-go to any of the House versions of the four so-called “must-pass” bills. Those bills are an extension of the middle-income tax cuts, estate tax adjustment, Alternative Minimum Tax relief and the “sustainable growth rate in Medicare,” known as SGR or the doctor’s fix.

In that letter, Pelosi and Hoyer also promised to reject any Senate versions of those bills that weren’t offset or didn’t include statutory pay-go language.

Pay-go has more or less been simmering on the backburner ever since, largely thanks to the attention being paid to the larger issue of health insurance reform, but also in part because of the Senate Finance Committee’s inclusion of a one-year SGR fix — which was fully offset — in its healthcare bill.

On Thursday, when asked about the $200 billion SGR bill introduced by Sen. Debbie Stabenow (D-Mich.), Pelosi stood by the promise she made to demand that the Senate accept pay-go in exchange for consideration of such legislation.

The Speaker answered with a simple “Yes” when asked if she would honor the April letter. But she made it a point to first reaffirm that promise to the Blue Dogs directly, telling them in a Thursday morning meeting that she would back them up on pay-go, according to Blue Dog leaders.

“We’re going to hold firm on our commitment that if you’re going to move SGR it’s either got to be paid for or it has to have the statutory pay-go legislation attached to it,” Blue Dog Co-Chairman Jim Matheson (D-Utah) said on Thursday. “That’s where the Blue Dogs are, and that’s, as of this morning, when we had a meeting with the Speaker and the majority leader, where they are.”

But Senate leaders are far less committed to accepting as a law what has been for both chambers a self-imposed budgetary rule since Democrats returned to power in 2006.

Stabenow’s bill lacks statutory pay-go language, and Majority Leader Harry Reid (D-Nev.) made no mention of pay-go when he announced his support for the Stabenow measure and his intention to put it on a fast-track to passage.

Reid has been supportive of statutory pay-go, but has openly questioned whether he could muster 60 votes for the measure. And Senate Budget Committee Chairman Kent Conrad (D-N.D.) has been skeptical of the very idea, arguing that a pay-go law would give too much control of the budget to the current and future White Houses.

Matheson said House Democrats were eager once again to make their case to Conrad, but made it clear that they’re unwilling to again bend to the will of the Senate.

“So far they [leaders in the Senate] have not been very inclined to agree with the statutory pay-go concept,” Matheson said. “But if this helps bring this issue to a head where we get to have a chance to move statutory pay-go, that’s a good thing.”

In a sign of just how serious House leaders are about making their demands clear, Hoyer met with both Reid and Conrad on Thursday afternoon to press his case and remind the two Senate Democrats of the House’s bottom line.

As of Thursday, House leaders had not made any decisions about whether to separate their own doctor’s fix from the healthcare bill they’re still trying to patch together.

The House Medicare repayment fix — which will cost $239 billion — isn’t offset either. But Blue Dogs say their agreement included the option of signing off on a non-paid-for SGR if that’s what it takes to enact statutory pay-go.

“I think the time is more ripe for pay-go than it’s ever been,” Matheson said. “Deficits have really jumped up. The economic downturn has created what I think is a different environment about government debt. There’s a heightened awareness and a heightened concern.”

Some Democrats say those deficits, along with Obama’s support for a pay-go law, is what led to Pelosi’s significant commitment to stand behind the Blue Dogs on their signature issue, even as the bloc of conservative Democrats continues to stand in between her and a healthcare bill that contains a public option to compete with private health insurers.