Capitol Outlook: Have you seen the Budget Resolution?
February 26, 2025 - We are two months into a new Congress and Administration, and it’s fair to observe a lot has happened in our nation’s capital since January 1st. Guide Consulting Services (GCS) is sending you this note to offer some clarity to the federal budget picture [with one exception – GCS will leave the discussion about the Department of Government Efficiency (DOGE) and mass federal employee layoffs for another day]. In particular, there is considerable confusion between the upcoming federal government funding deadline, the budget reconciliation process, and the latter’s impact on Medicaid. The first thing we want to emphasize is: these are two largely separate legislative processes.
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FEDERAL DISCRETIONARY FUNDING
As this newsletter is being written, we are approaching the midpoint of the 2025 federal fiscal year. The federal government is operating under a Continuing Resolution (CR) set to expire on Friday, March 14. Relative to the Department of Health & Human Services (HHS), the CR is keeping the agency’s principal operating divisions – encompassing the Centers for Medicare and Medicaid Services (CMS), the National Institutes of Health (NIH), the Health Resources and Services Administration (HRSA), the Substance Abuse and Mental Health Services Administration (SAMHSA) and the Administration for Community Living (ACL) – frozen at FY 2024 funding levels.
Ahead of the March 14 expiration, Congress has three main options for next steps:
Agree to topline numbers governing all 12 appropriations bills and further agree to detailed line by line House-Senate conference reports governing nearly every federal department (including HHS).
Conclude that full year bills are not possible and instead agree to a CR governing federal spending for all of FY 2025, which ends on September 30.
Shut down the federal government for an unknown period of time because of disputes over efforts to use the CR to reign in the activities of DOGE.
With the current environment on Capitol Hill remaining uncertain, we do not have predictions for the outcome. We will provide further updates to your inbox when clear developments happen.
BUDGET RECONCILIATION PROCESS: MEDICAID, MEDICAID, MEDICAID
Explaining the House Passed Budget Resolution
Earlier this week the House of Representatives passed a budget resolution with a 217-215 vote along sharply partisan lines. The action – which is separate from the upcoming federal funding deadline set by the CR – is the starting gun in the race to reshape the Medicaid program. An identical budget resolution passed through the House and Senate allows Congress to later use the budget reconciliation process. The process would enable Congress to bypass a Senate filibuster and pass a reconciliation bill using a simple majority of Republican votes in both chambers. As of now, the budget resolution proposes intended levels of financing, and the budget reconciliation will make the actual tax cuts and spending reductions to programs like Medicaid.
What Happens Now That the Budget Resolution Passed?
Make note – we are only at the first turn of a long race. The next step requires the Senate to adopt an identical version of the House passed budget resolution. After that, the Senate Finance Committee and the House Energy & Commerce Committee must make the actual policy changes to Medicaid necessary to generate truly huge savings. End-to-end, this process will take months. If the House and Senate set a land speed record, a reconciliation bill might be on President Trump’s desk by Memorial Day.
What’s at Stake for Medicaid?
In short, the House passed legislation proposes $880 billion in Medicaid spending reduction – the equivalent of an 11% cut across the board. In turn, that spending cut would be translated into possibly three policy changes. First, mandatory work requirements. Second, scaling back the financial incentive for the Medicaid expansion in 40 states. Third, the imposition of so-called “per capita caps” on individual Medicaid patient populations. For example, persons with Intellectual and Developmental Disabilities (I/DD) and people with more serious mental disorders would be slotted into a capped “elderly, blind and disabled” patient category.
The result would be enormous Medicaid cost shifts to state and county budgets and dramatic spikes in the number of people with no health insurance. Just scaling back the Medicaid expansion could cause more than 20 million Americans to lose their Medicaid coverage.
WHY DOES THIS ALL MATTER?
GCS represents many mental health and substance use provider organizations as well as other collectives who serve related populations, and we are concerned about a range of impacts. First, since most Medicaid behavioral health benefits are optional, states may be forced to reduce the array of covered mental health and substance use services. Second, the aforementioned cost shifts to state budgets will put downward pressure on Medicaid reimbursement rates. In turn, could push individual providers like clinical social workers and certified mental health counselors to withdraw from the Medicaid program. Third, a spike in the number of Americans without health insurance is guaranteed to increase uncompensated care costs for community based mental health and substance use treatment providers.
Again, we are only in the very beginning of the entire budget reconciliation process. While there are many unknowns at this point, we can share one note of wisdom from previous reconciliation battles – grassroots and grasstops advocacy efforts will make all the difference in the outcome of these procedures.