Senate adds Medicare aid for Iowa to tax cut bill

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Senate adds Medicare aid for Iowa to tax cut bill

By Jane Norman
Des Moines Register, May 16, 2003

Washington - The U.S. Senate approved a landmark Medicare provision Thursday that would send millions of dollars in added federal aid to Iowa hospitals and doctors, who long have complained that the state is short-changed by the program for the disabled and elderly.

The additional health care money passed 86-12 as an amendment to a major tax cut bill approved 51-49 Thursday by the Senate.

The provision was proposed by Republican Sen. Charles Grassley of Iowa, the manager of the tax cut bill, and backed by Democratic Sen. Tom Harkin of Iowa. It would increase Medicare reimburse- ments for 30 rural states.

Grassley said the deal would bring about $377 million in additional Medicare reimbursements to Iowa during the next decade for doctors and hospitals, mostly for the latter.

"The legislation goes a long way to fixing the shortcomings in Medicare that shortchange Iowa and other rural states," Grassley said. Harkin, who abandoned his own competing amendment to team up with Grassley, said it was an "extremely important" development for Iowa.

Grassley probably will have to fight to keep the provision in the tax cut package throughout what is likely to be a contentious conference committee between the Senate and the House. The House approved a much larger $550 billion tax cut closer to the Bush administration's original $700 billion proposal.

House Budget Committee Chairman Jim Nussle, a Manchester Republican, said the amendment "continues the progress we've made in advancing this issue and helps build momentum" as the House moves toward Medicare reform. But he stopped short of saying he would back it in the House.

Iowa health leaders have said the state runs a shortfall of about $70 million a year on Medicare reimbursements, so an infusion of about $37 million a year would go halfway toward solving the problem.

Grassley would pump money in by changing the formula for reimbursements in connection with hospital wages, by making rural and urban hospital payments more equal, and by providing a new adjustment for rural hospitals with low patient volume.

Kirk Norris of the Iowa Hospital Association praised the amendment as a "great thing" and said he is optimistic about conference committee approval if Grassley is the conference chairman as expected.

In what's called a "vote-a-rama" in the Senate, lawmakers in mostly party-line votes through the day defeated more than two-dozen amendments that would substantially change the legislation that Grassley, as chairman, brought out of the tax-writing Senate Finance Committee.

The biggest development of the day: a new version of a tax cut for stock dividends advocated by President Bush. Republicans now plan to push for a one-year reduction in dividend taxes followed by a three-year suspension of them. The plan passed 51-50, with Vice President Dick Cheney casting the tie-breaking vote in the closely divided Senate.

Grassley, 69, spent 15 hours on the floor Wednesday managing debate until after midnight, then returned at 9:15 a.m. Thursday to continue fielding amendments through the evening.

The failed amendments included a move by Democrats to increase $20 billion in the bill for cash-strapped states to $40 billion. The larger figure was rejected 52-47. Grassley said it would be "fiscally irresponsible" to stray above the $20 billion mark, which would mean $130 million to $160 million annually for Iowa during the next two years.

The House did not include any aid to states in its version of the tax cut bill.

The tax cut for dividends has been the most contentious piece of Grassley's bill all along because the president wants a bigger cut. Conservatives chafed at a compromise Grassley devised in committee that excluded the first $500 of dividends from taxes, then phased in additional reductions.

Instead, Sen. Don Nickles, R-Okla., offered an amendment at a cost of $124 billion that would at first reduce taxes on corporate dividends, then eliminate them completely for three years. They then would be reinstated.

But opponents said the sunset was a gimmick because the clear intention is to permanently extend a total elimination of stock dividends. Robert Greenstein of the liberal-leaning Center on Budget and Policy Priorities said the true cost of the dividend tax cut then would grow to $660 billion or more over 10 years.