Correction to This Article
A Dec. 21 article incorrectly said that House and Senate negotiators had struck from their budget bill a provision allowing states to create variable co-payments for medicines on and off preferred drug lists for Medicaid recipients. The provision was included in the final bill, but a related provision exempting mental health drugs was left out.   A Dec. 21 article said that Sen. Edward M. Kennedy (D-Mass.) supported changes in the federal student loan program that would yield $18 billion in savings to the federal government. The article should have said that Kennedy wanted the money to go toward expanding higher-education assistance.

Senate Faces Showdown on Bills

Sen. Ted Stevens (R-Alaska) has attached to the defense appropriations bill a provision that would allow oil drilling in the Arctic National Wildlife Refuge.
Sen. Ted Stevens (R-Alaska) has attached to the defense appropriations bill a provision that would allow oil drilling in the Arctic National Wildlife Refuge. (By Melina Mara -- The Washington Post)
By Jonathan Weisman and Shailagh Murray
Washington Post Staff Writers
Wednesday, December 21, 2005

Vice President Cheney cut short a trip to the Middle East and rushed back to Washington overnight, preparing to cast a tiebreaking vote on budget cuts in the Senate today, as Republicans also make a high-stakes bid to approve oil drilling in the Alaska wilderness.

The budget legislation would trim federal spending growth by nearly $40 billion over the next five years. Cheney's change in plans came as five Republican senators signaled they would vote against the measure, joining an apparently united Democratic caucus in opposing a bill that would allow states to impose new fees on Medicaid recipients, cut federal child support enforcement funds, impose new work requirements on state welfare programs and squeeze student lenders.

Five GOP defections would lead to a 50-50 Senate tie if all lawmakers vote. "We do need to reduce spending, but I cannot accept the priorities in this bill," said Sen. Susan Collins (R-Maine), in announcing her opposition to it.

Cheney canceled visits to Saudi Arabia and Egypt after stops in Iraq and earthquake-devastated Pakistan.

"The vice president is returning to Washington to be on hand in the Senate to fulfill his constitutional duties as president of the Senate and cast tiebreaking votes, if necessary," spokesman Steve Schmidt told reporters accompanying Cheney on his overseas trip.

Also today, a Senate showdown is expected over a provision allowing oil drilling in the Arctic National Wildlife Refuge, added to the fiscal 2006 defense appropriations bill by Sen. Ted Stevens (R-Alaska). Democrats intend to mount a procedural challenge in an effort to strip out the provision, or if necessary, to block the bill until Stevens backs down. Minority Leader Harry M. Reid (D-Nev.) predicted "a very close vote."

Republican leaders have made contingency plans to reconvene the House tomorrow to pass a stripped-down defense bill that would fund the Pentagon at the 2005 level, if the current bill bogs down.

Stevens said on the Senate floor yesterday that he will not relent. "We're going to face up to ANWR either now or Christmas Day or New Year's Eve or sometime, however long we stay in."

The veteran senator said that if the drilling provision is blocked, it would delay final passage of the defense bill until next year -- forcing the Pentagon to operate on an extension of 2005 funding levels.

Senate Appropriations Chairman Thad Cochran (R-Miss.) said he was "optimistic" about the drilling provision's chances, and defended Stevens against Democratic charges that he was breaking a Senate rule that prevents unrelated provisions from being inserted into final bills. "There's nothing new about this process or procedure," Cochran said.

Senate Budget Committee Chairman Judd Gregg (R-N.H.) continued to express confidence that the hard-fought budget measure would pass, possibly without Cheney's help. And it appeared the Republican bleeding had been stanched. Two moderates under pressure to oppose the deal, Sens. Arlen Specter (Pa.) and Norm Coleman (Minn.), said they would reluctantly support it.

Budget experts say the bill would make only a dent in the federal deficit, slicing less than one-half of 1 percent from the estimated $14.3 trillion in federal spending over the next five years. But opponents say the poor would bear the brunt of the cuts -- especially to Medicaid, child support enforcement and foster care -- whereas original targets for belt-tightening, such as pharmaceutical companies and private insurers, largely escaped sanction.

A House-passed provision, for instance, would have allowed states to establish preferred medication lists for Medicaid, then steer patients to cheaper drugs by charging higher co-payments for medicines off the list. Rep. Steve Buyer (R-Ind.) garnered headlines last month by winning an exclusion from the provision for mental health drugs, a boon for one of his state's biggest companies, Eli Lilly. But the final House-Senate compromise eliminated the preferred-drug list provision, even though it maintained a House provision that allows states for the first time to charge poor Medicaid patients co-payments, premiums and deductibles.

Likewise, the compromise eliminated a Senate-passed provision that would have saved the federal government $36 billion over the next decade by eliminating financial incentives to lure managed care companies into Medicare. Under White House pressure, the Senate provision was gutted in the House-Senate compromise.

The heated Senate debate yesterday also focused on complex student loan changes that would save $12.7 billion over five years. Under the provision, student loan interest rates would be locked in at 6.8 percent and could not be refinanced as commercial rates fluctuate. Private lenders would continue to be able to borrow money at a rate guaranteed to generate a profit.

Currently, any time the student loan interest rate is higher than the bank's guaranteed rate, the bank gets to keep the extra profit. Under the budget bill, that windfall would have to be returned to the federal government, a change that should yield $18 billion in savings. The change has strong Democratic advocates, including Sen. Edward M. Kennedy (Mass.).

But student groups, higher-education advocates and their allies in Congress say much more of those savings should go toward expanding higher-education assistance or lowering student loan rates, not deficit reduction. "They could give students a lower interest rate, but their choice is to keep interest rates high," said Luke Swarthout of the U.S. Public Interest Research Group. "They're asking students to pay for tax cuts."

© 2005 The Washington Post Company