What is budget reconciliation?

Budget reconciliation is a legislative process used in Congress to expedite the passage of budget-related bills under particular procedural rules. Established by the Congressional Budget Act of 1974, it allows certain legislation to bypass the usual 60-vote threshold in the Senate, making it easier to pass with a simple majority vote (51 votes). This process has certain requirements and must be used for budgetary measures that affect revenues (taxes), spending, or the federal debt limit. Notably, budget reconciliation can be used to make changes to “mandatory” spending like Medicare, Medicaid, and federal civilian (i.e., social security) and military retirement programs.

The budget reconciliation process begins when Congress approves a budget resolution, which outlines the government’s revenue and spending priorities. This resolution is then used to create a reconciliation instruction, directing specific committees to draft legislation that achieves the fiscal goals set in the budget (i.e., money rescinded or allocated to a certain level) based on the committee’s areas of jurisdiction. Once these committees submit their proposals, the reconciliation bill is drafted, and the full House and Senate must vote on it by a simple majority. If the bill passes both chambers, it is sent to the president to be signed into law.

In the Senate, the Byrd Rule, named after Senator Robert Byrd, allows senators to block provisions of a reconciliation bill that are considered “extraneous,” which includes provisions that do not change spending or revenue, or the impact of the provision would be “merely incidental.” This is an attempt to ensure that the reconciliation procedure is targeted to fiscal purposes, not policymaking. These determinations are made by the Senate parliamentarian.  

Current Status

The House of Representatives and the Senate have passed different FY25 budget resolutions. The Senate resolution calls for at least $1 billion in spending reductions over the 10-year budget window by the Senate Finance Committee, which has jurisdiction over tax policy, Medicare and Medicaid. By contrast, the House resolution calls for at least $880 billion in savings over the same window to be identified by the House Energy & Commerce Committee. This committee does not cover tax policy but does have sole jurisdiction over Medicaid and the Prevention and Public Health Fund, as well as partial jurisdiction on Medicare. The House instructions also call for $230 billion in reductions from the Agriculture Committee, which has jurisdiction over the Supplemental Nutrition Assistance Program (SNAP) and farm subsidies. In addition, the House instructions call for $500 billion in further cuts not assigned to a specific committee.

How could the budget reconciliation process impact Medicaid?

Both the Senate Finance Committee and the House Energy & Commerce Committee have jurisdiction over Medicaid and Medicare spending. Last week, the Congressional Budget Office (CBO) confirmed that the House Energy and Commerce Committee cannot reach its targeted cuts of $880 billion without making cuts to Medicaid or Medicare.

While the Senate Finance Committee has broad jurisdiction over taxes and can raise revenue, the House Energy and Commerce Committee does not. According to CBO, when Medicare is set aside, the total funding under Energy and Commerce Committee’s jurisdiction is $8.8 trillion over 10 years. Medicaid accounts for $8.2 trillion of that, or approximately 93%. When both Medicare and Medicaid are excluded, the committee oversees a total of $581 billion in total spending — much less than the $880 billion target for cuts. In order for the House Energy & Commerce Committee to meet this target number, the Committee would have to propose changes that would reduce overall Medicaid spending. And to reach that level of savings, the changes to the program would have to be significant.

Notably, the Senate resolution authorizes the Budget Committee to adjust the targets for the purpose of “protecting the Medicaid program,” which may include “strengthening and improving” Medicaid in a deficit-neutral fashion. The House resolution does not include such a protection.

What Comes Next?

To date, the administration has expressed its preference for the House proposal, but both chambers are currently working on their own version of their reconciliation packages.

In order to become law, the House and Senate must pass identical budget reconciliation bills. With the significant differences in the House and Senate versions of the resolutions, it is still unclear what a final bill would look like.  

NACCHO recognizes the importance of Medicaid and the Prevention and Public Health Fund to the work of local health departments and the health of their communities. For more updates, please subscribe to our News from Washington newsletter.