Bills to Cut Social Programs
Move Forward in Senate and House

WASHINGTON -- Deficit-reduction bills advanced in Congress as Senate Republicans completed a $39 billion five-year package and House Republicans began work on a more-ambitious effort demanding bigger cuts in social-service and health programs.

Lawmakers neared agreement last night on legislation that would mandate disclosure by the Food and Drug Administration of any waivers of conflicts-of-interest rules for people selected to serve on its advisory committees. The FDA would be required to publish on its Web site all waivers at least 15 days before an advisory-board meeting. Proponents argued that the measure would lead to more transparency and would discourage such waivers.

Medicaid, food stamps and child-support enforcement funding are three potential flash points as the House and Senate craft their competing deficit-reduction bills. The revised $39 billion estimate for the Senate package came in higher than expected, and if some of the extra spending provisions were dropped, the bill could inch toward the $50 billion five-year savings target set by House Speaker Dennis Hastert (R., Ill.).

Mr. Hastert is having trouble finding enough Republican votes to ensure reaching $50 billion. Rather than wait any longer, House committees will begin voting today on their assigned savings numbers so their bills can be assembled into a final package next week by the House Budget Committee.

The Senate expects to complete that task this afternoon. The last major piece -- an estimated $10 billion in savings from the Medicare and Medicaid programs -- was approved by the Senate Finance Committee on an 11-9 vote last night.

Among the final changes was a substantial increase in the rebates paid to the government by makers of generic as well as brand-name drugs bought under Medicaid, the health-care program for the poor. As first proposed, the Finance Committee bill would increase the current 15.1% rebate for brand drugs to 17%, for a savings of $1.1 billion. Modifications yesterday, backed by Senate Majority Leader Bill Frist (R., Tenn.), raised about $300 million more by applying the same 17% standard to generic drugs, which pay 11%.

Proponents said the adjustment was warranted to offset other costs and balance the field between brand and generic companies. The generic lobby angrily argued that the increase was disproportionate and they will have a harder time than brand manufacturers in passing the costs onto other customers.

All told, the Senate bill would achieve almost $4.6 billion in savings from the rebates and from tightening the formula for reimbursing pharmacists who dispense drugs to Medicaid beneficiaries. By comparison, a House Energy and Commerce Committee bill takes less from the industry and calls for larger copayments from Medicaid beneficiaries and a potential reduction in benefit levels.

Thus far, House Republicans have shied away from taking any savings from Medicare, the health-care program for the elderly, as a way to lessen the burden on Medicaid funding.

For example, Energy and Commerce Committee Chairman Joe Barton (R., Texas) assumes net savings of about $11 billion from Medicaid exclusively. The Senate Finance panel, by comparison, would meet its $10 billion target by taking roughly equally from Medicaid and Medicare, with much of the savings coming from private managed-care plans under the Medicare Advantage program.

The House pressure for more savings will force tough choices elsewhere, with the bulk of reductions under the jurisdiction of three panels: Ways and Means, Education and Workforce, and Agriculture. Among the proposals are significant reductions in federal funding for state child-support enforcement programs and potential savings from food stamps, an area of the budget that the Senate has protected.

The Ways and Means bill promises savings of $8 billion during five years and $21.1 billion during the next decade. The federal match to help states pay the administrative costs for child-support enforcement programs would be scaled back to 50% for a savings of almost $3.8 billion over five years.

The Education and Workforce panel must achieve net savings of about $18.1 billion -- $5.4 billion more than under the spring budget resolution. Some of the proposals affecting student-aid administrative funds appear to be bookkeeping sleights of hand. More savings are demanded from lenders under the federal student-loan program, and the bill would give the Pension Benefit Guaranty Corp. greater discretion to increase flat-rate premiums charged to companies with covered pension plans.

An $11 increase, raising the flat rate to $30 from $19 per participant, would take effect in 2006, rather than being phased in more gradually. And the PBGC would be given the added discretion to raise the flat rate as much as 20% annually during the next four years.

Republicans on the House Agriculture Committee met last night to discuss their options. Chairman Bob Goodlatte (R., Va.) said he had been asked to find $4.25 billion in savings or $1.25 billion more than his Senate counterparts. A meeting of the House committee is slated for tomorrow, and while making no commitment last night, Mr. Goodlatte has signaled a greater willingness to make changes in nutrition programs for the poor -- an especially sensitive topic, like Medicaid, in the wake of Hurricane Katrina.

Write to David Rogers at david.rogers@wsj.com