In early 2021, we wrote about the basic rules for passing legislation in the House versus the Senate and how the budget reconciliation process allows certain legislation to move forward with approval from a simple majority of Senators rather than be subject to the filibuster and the usual three-fifths or 60-vote threshold. Given recent reports that Congressional Republicans are targeting Medicaid for draconian cuts as part of budget reconciliation next year, we thought it would be helpful to provide an updated explanation of the reconciliation process, including the role of the budget resolution–an important first step in the process.

The Budget Resolution

Before Congress can consider budget reconciliation legislation, it must first develop a budget resolution. This process is done through the Budget committees in the House and Senate, which establish overall spending and revenue levels by various budget functions for the current or upcoming fiscal year. The resolution can also include instructions to various authorizing committees to make reconciliation bill “recommendations” to meet certain mandatory spending increases or decreases, revenue increases or decreases, and/or deficit increases or reductions. In addition, the budget resolution could contain general reconciliation instructions without specifying committee targets or combine committee instructions with broader, overall directives. For example, instructions could direct certain committees to achieve specified savings while providing overarching guidance on the total deficit reduction or spending increase limits.

The resolution must be agreed to by both chambers; however, a simple majority is sufficient for passage. It is governed by special rules in the House and Senate that are designed to speed consideration, including limited debate time and no Senate filibuster. Importantly, the resolution is not sent to the President for approval or veto and thus a new budget resolution could be passed relatively quickly in the new Congress without waiting until the President’s inauguration on January 20th.

All in all, as noted by the Congressional Research Service, the budget resolution serves as a congressional statement in broad terms regarding appropriate revenue, spending, and debt policies. “Broad terms” is key here because the budget resolution isn’t the document where you’re going to find specific legislative policies (take a look at this example from Fiscal Year 2022 and you’ll see it’s a lot of numbers), but rather intended discretionary and mandatory spending levels and revenue levels.

So why is the budget resolution so important?

The budget resolution is critical because it establishes targets for increases or decreases in mandatory spending and revenues committees are committed to when considering budget reconciliation legislation. (These could be set as specific dollar amounts or could involve floors and ceilings.)  For example, a budget resolution could include an instruction to the Senate Finance Committee (the committee with jurisdiction over Medicaid and CHIP) that requires the Committee to reduce mandatory spending by at least a certain amount. In addition, the budget resolution could set overall reconciliation deficit targets so a reconciliation bill could not add to the deficit by more than a certain amount. Congress is then bound by those numbers as part of the budget reconciliation process. (Otherwise, the bill loses its privileged reconciliation status and thus its ability to be approved with a simple majority vote in the Senate). As a result, inclusion of a large overall deficit reduction number in the budget resolution or a large mandatory spending reduction target for a committee like Senate Finance would likely require the Committee to make dramatic cuts to programs under its jurisdiction, placing Medicaid at severe risk.

Reconciliation

Following the instructions under the budget resolution, generally speaking, the instructed authorizing committees – which when it comes to Medicaid means the Senate Finance Committee and House Energy & Commerce Committee–submit their legislative recommendations to their respective Budget Committees. The House and Senate Budget Committees then incorporate the legislative recommendations into an omnibus budget reconciliation bill.

As discussed in our 2021 blog, in the House, reconciliation bills move forward in the same manner as other legislation. But reconciliation comes with major procedural advantages (and challenges) in the Senate. The main procedural advantage is that reconciliation bills are limited to 20 hours of debate and not subject to filibuster; therefore, reconciliation bills can move forward and pass with a simple majority vote. Another procedural advantage is that amendments to reconciliation bills must be germane – a strict standard requiring relevance to the pending bill.

Reconciliation bills however are not an open-ended, easy way to maneuver around the Senate’s filibuster rules. The Senate can consider three basic subjects of reconciliation – spending, revenues, and the federal debt limit – in a single bill or multiple bills, but it can consider each of these in only one bill per year (unless Congress passes a second budget resolution which Congressional Republicans intend to do later in calendar year 2025, according to public reports).

Byrd Rule

Additionally, reconciliation bills are subject to the Byrd Rule in the Senate (named after Senator Robert Byrd and first adopted in the 1980s). The idea behind the Byrd Rule is that because reconciliation bills are considered under expedited procedures, they should be limited in scope. But the application of the Byrd Rule is a lot more complicated. The Byrd Rule prohibits the inclusion of “extraneous” measures, defined as: measures with no budgetary effect; that worsen the deficit when a committee has not achieved its reconciliation target; outside the jurisdiction of the committee that submitted the title or provision; that produce a budgetary effect that is merely incidental to the non-budgetary policy change; that increase deficits for any fiscal year outside the reconciliation window; and that recommend changes to Social Security. Senators asserting that there is an extraneous provision can raise a point of order against the provision, amendments, or the conference agreement, and the Senate Parliamentarian will decide whether there is a Byrd Rule violation. If the provision is found to violate the Byrd Rule, it is struck and cannot be offered later as an amendment.

Past Reconciliation Bills

For a closer look at how reconciliation has been used in the past, including with respect to Medicaid policy, check out Part 2 of our 2021 blog focused on the reconciliation process and how reconciliation bills have made major changes to Medicaid policy over the years.

In addition, since early 2021, we saw the 117th Congress pass two budget reconciliation bills. The first was the American Rescue Plan Act in March 2021, aimed at addressing the economic and public health impacts of the COVID-19 pandemic and included several Medicaid policies. The second was the Inflation Reduction Act, passed in 2022, which focused on inflation, climate change, and drug pricing.

Ultimately, while the budget reconciliation process can be employed to advance policies that support children and families (as demonstrated by the twelve-month postpartum coverage option in the American Rescue Plan Act), it has also been used to try to implement massive cuts to Medicaid, as evidenced by the failed 2017 repeal and replace bills. Understanding the budget reconciliation process, including the importance of the budget resolution and its potential rapid consideration in the new year, is therefore of key importance, especially in light of potential threats to Medicaid.