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The House GOP’s Medicaid crunch

Senate GOP faces obstacles blocking climate policies

Bernanke has Powell’s ear

House conservatives shun antisemitism efforts

THE TOP

The House GOP’s Medicaid crunch

Happy Wednesday morning.

This is the hard part that every House Republican foresaw, yet seemingly none are prepared for.

With the Memorial Day recess just 15 days away, the battle over huge cuts to Medicaid is pitting the most vulnerable House Republicans against the conservative wing of the GOP conference. It’s a clash of egos, ideology and political survival skills that’s come to define the party in the Donald Trump era.

Here’s the crux of where House Republicans are at the moment: After a nearly two-hour meeting between the GOP moderates and Speaker Mike Johnson, it’s clear that the moderates are winning on the high-stakes issue of cutting hundreds of billions of dollars from Medicaid. At least for the moment.

As he left his office Tuesday evening, Johnson said that he’s likely ruling out two big Medicaid changes that most moderates strongly opposed: lowering the rate by which the federal government reimburses states for Medicaid services – FMAP – and per capita caps for the Medicaid expansion population under Obamacare.

“I think we’re ruling [per capita caps] out as well but stay tuned,” Johnson said, repeating his oft-used mantra.

But Rep. Chip Roy (R-Texas), a hardliner who has little patience for Johnson, immediately shot back in a post on X following the speaker’s comments: “Well — I haven’t ruled it out. It’s necessary to stop robbing from the vulnerable to fund the able-bodied.”

Roy continued:

The House Freedom Caucus also balked at the speaker’s decision.

The problem for Johnson is that he can’t please the moderates without risking an uproar from conservatives. And vice versa. It’s the same dynamic that’s plagued the last three Republican speakers. Moderates help give Republicans their majorities. Yet they’re often forced to swallow conservative policies that don’t fit the political makeup of their districts.

Although catering to the moderates isn’t easy either.

Without lowering the FMAP or applying per capita caps, it’s much harder to reach the $880 billion in spending cuts from the Energy and Commerce Committee’s jurisdiction called for under reconciliation. That said, the GOP leadership seems confident that the target is still in reach and plans to move ahead with a committee markup next week.

The mod squad. The Republicans pushing back on Medicaid cuts are coalescing around three main proposals: additional work requirements for able-bodied adults (GOP leaders want to raise the cutoff to age 64, which spurred a big pushback); more frequent eligibility checks; and cutting off programs that allow undocumented immigrants to receive benefits.

However, these provisions alone won’t hit the $880 billion target in cuts mandated for the Energy and Commerce Committee. Sources in the room estimate these three steps would reduce Medicaid spending by $400 billion to $500 billion.

At one point, Johnson signaled to the moderates that the $880 billion total was “aspirational,” said one House Republican who attended the session. GOP leaders believe that some committees will come in above their savings instructions, so that could give E&C breathing room.

Yet most importantly, there are at least a dozen GOP lawmakers who will vote against Medicaid changes that go beyond this framework. This is far more than the trio of Republican votes Johnson and Trump can lose.

Even within these three buckets, moderates are wary of the specifics.

Moderates are also worried that if they agree to $880 billion in cuts, the Senate will reject the biggest Medicaid reductions. Meaning they’ll have taken a politically toxic vote for nothing.

Several moderates said House Republicans need to coordinate with the Senate and White House on final Medicaid proposals before moving ahead with a reconciliation vote.

“What we don’t want to do is pass a bill through the House of Representatives that doesn’t even have a shot with the president or with the United States Senate,” Rep. Jeff Van Drew (R-N.J.) said. “That would be insane. It’s stupid.”

The Medicaid options. Lowering the FMAP or imposing per capita caps on the expansion population were the clearest options for Energy and Commerce to meet its budget instructions.

The panel can pull from other areas under its jurisdiction, although CBO has said most of the $880 billion would have to come from Medicaid.

– Limit Medicaid provider taxes. Several states rely on the budget trick to bring in more federal funding for Medicaid. Ending or restricting them would likely hit Republican states the hardest. CBO estimates the limits would save nearly $600 billion over a decade.

– Limit state-directed payments. The Biden administration had effectively removed restrictions on state-directed payments. Republicans could curtail or end that Biden-era rule. When the GOP floated it in January, Republicans estimated it would only raise about $25 billion.

– Medicare site neutrality. This proposal would generally align Medicare payments for outpatient services across care settings. House Republicans proposed this option in January. CBO estimates it could bring in around $157 billion.

– Laura Weiss, Samantha Handler, Jake Sherman and John Bresnahan

House GOP Conference Chair Lisa McClain will kick off The Summit: Investing in Small Businesses on May 13 at 9 a.m. ET. Hear her take on how small businesses strengthen local communities. Plus, conversations with leaders from Verizon, Liquid 2 Ventures and more. Secure your spot today.

THE SENATE

Senate GOP faces obstacles blocking climate policies

The Senate is barreling toward a showdown over its own rules and procedures as Republicans aim to block California’s climate policies.

Senate GOP leaders are seeking to use the Congressional Review Act to invalidate California’s Clean Air Act waivers that allow the state to set tougher environmental standards for cars and trucks in particular.

But the Senate parliamentarian is deferring to a Government Accountability Office assessment, stating that the waivers don’t qualify as federal rules that would otherwise be subject to congressional scrutiny under the CRA.

Senate Republican leaders say they’re still weighing their options. In the meantime, they’re rejecting Democrats’ claims that defying the GAO’s guidance — which could require voting to overrule the Senate parliamentarian — would set a new precedent or weaken the filibuster.

“It came to the Senate as a rule. And rules are subject to the Congressional Review Act, which we plan to do,” Senate Majority Whip John Barrasso said.

Next steps: It’s unclear how exactly this will play out. Republicans haven’t yet scheduled a vote on the CRA, which passed the House last week with 35 Democratic votes. Senate Majority Leader John Thune was noncommittal Tuesday, saying Republicans are still “having conversations.”

In a recent letter to GOP leaders, top Democrats, including Senate Minority Leader Chuck Schumer, warned of “a dramatic break from Senate precedent with profound institutional consequences” if Republicans push ahead.

“[O]nce that precedent is set, a future Senate majority could subsequently apply it to legislation beyond the CRA,” the Democrats wrote. “Put bluntly, there is no cabining a decision to overrule the parliamentarian.”

Thune has previously cautioned against voting to overrule the Senate parliamentarian when it comes to budget reconciliation, saying it would mean gutting the filibuster. Sen. Adam Schiff (D-Calif.) referenced these comments and urged Republicans to consider “what it will mean when they’re in the minority.”

Thune said that’s not the issue in this particular circumstance. He accused Democrats of hypocrisy given their previous support for killing the filibuster. Forty-eight Senate Democrats voted to eliminate the filibuster in 2022, including Schumer.

“That’s pretty rich coming from the folks who actually voted to nuke the filibuster in the last session of Congress,” Thune told us.

Yet the issue here is whether the resolution can be granted expedited consideration in the Senate, as is the case with executive branch rules that qualify for congressional review. Otherwise, the measure would need to go through the cumbersome Senate floor process and ultimately be subject to a filibuster and the 60 votes required to overcome it.

Sen. Kevin Cramer (R-N.D.) said Republicans are doing “what we’re legally allowed to, and that is [to] overrule a regulation by a federal agency.”

— Andrew Desiderio and Max Cohen

HOUSE REPUBLICANS

House conservatives shun antisemitism efforts

Hardline House conservatives want Congress to be more hands-off when it comes to fighting antisemitism, arguing that proposed legislation infringes on First Amendment rights.

Christian conservatives have pushed back on two recent bills dealing with Israel and antisemitism, complicating Republican efforts to accuse Democrats of abandoning Jews.

“Congress should just stay out of these fights to crack down on free speech,” Rep. Thomas Massie (R-Ky.) told us. “It’s not illegal to be antisemitic.”

The Antisemitism Awareness Act, which passed the House with broad bipartisan support last Congress, hasn’t won any new supporters as it struggles to make it through the Senate.

Following pressure from Christian conservatives, the Senate version of the bill was amended to exclude penalties for those alleging Jews killed Jesus.

But a committee markup last week went south for Republicans after Sen. Rand Paul (R-Ky.) joined with Democrats to approve amendments that endanger the bill’s future among the wider GOP.

House GOP leadership also pulled a bill this week that aimed to protect Israel from boycotts following vocal opposition from conservatives, including Massie and Rep. Marjorie Taylor Greene (R-Ga.).

In a post on X, Greene said it’s her job to defend Americans’ freedoms to boycott whoever they want and that Congress should prioritize domestic issues over foreign nations.

Rep. Ralph Norman (R-S.C.) argued that congressional action isn’t needed on antisemitism since most people know it’s wrong.

“We shouldn’t do anything further with antisemitism,” Norman said. “I don’t know how you define it. It’s subjective.”

The leadership angle: GOP leadership has sought to make its crackdowns on anti-Jewish rhetoric and hate crimes a winning issue, especially around student-led protests over the war in Gaza that wreaked havoc on college campuses last year.

President Donald Trump has also prioritized the issue, threatening to pull federal funding from Ivy League universities and deport students who engaged in alleged violence during protests against Israel last year.

The House Education and Workforce Committee will hold a hearing today about combating antisemitism on college campuses.

GOP Conference Chair Lisa McClain argued against the idea that combating antisemitic attacks violates free speech during a news conference Tuesday.

“I’m all for free speech, and I think Republicans are all for free speech, but I’m also following the rules,” McClain said. “This is a safety issue. This should be nonpartisan.”

Rep. Mike Lawler (R-N.Y.) said he is working with leadership to bring the Antisemitism Awareness Act, which he is co-leading with Rep. Josh Gottheimer (D-N.J.), back to the floor.

“I’m pushing to get the House to take it up. And when it does come, it’ll pass with broad bipartisan support as it did last Congress,” Lawler said.

– Mica Soellner

… AND THERE’S MORE

News: Rep. Raja Krishnamoorthi (D-Ill.) is entering the Illinois Senate Democratic primary, bringing his $19 million war chest into a crowded race to succeed Sen. Dick Durbin (D-Ill.). Krishnamoorthi’s launch video hails how he spent his entire life “standing up to bullies” and slams President Donald Trump’s policies.

First in Punchbowl News: Sens. Todd Young (R-Ind.) and Maggie Hassan (D-N.H.) are introducing their bill to revive full, upfront R&D deductions for businesses. That’s one of corporate America’s biggest tax goals.

The bill would restore the R&D benefit back to 2021 and moving forward. It would also expand R&D incentives for startups. The bill has over two dozen cosponsors.

Republicans are trying to permanently extend the R&D benefit in their tax bill. The House Ways and Means Committee is expected to mark up its package next week. Retroactivity is a harder sell.

Read the bill here.

— Laura Weiss and Max Cohen

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