The proposed House budget for the rest of the current fiscal year will severely curtail the ability of the federal government to make payments to vendors under various Medicare programs, including Medicare Advantage, the Obama administration says in letter signed by Department of Health and Human Services Kathleen Sebelius.

Senate Republicans say through their Policy Committee that the Obama administration is wrong, and that regardless, can be prevented by HHS “unless the Administration wishes to withhold Medicare program benefits to score political points.”

The letter was sent Tuesday by Ms. Sebelius in response to an inquiry by Senator Max Baucus, D-Montana, chairman of the Senate Finance Committee.

Senator Baucus sought the letter in advance of the Wednesday vote on dueling Democratic and Republican proposals dealing with funding the government for the rest of this fiscal year.

Both the Republican bill–the House bill, H.R. 1, which cuts spending by $61 billion for the remainder of the year–and the Democratic version, which cuts spending by $4 billion, failed to garner enough votes to pass Wednesday.

That sends both sides back to the drawing board.

In a letter signed by Kathleen Sebelius, secretary of the Department of Health and Human Services, the administration says that, if H.R. 1 would be enacted the Centers for Medicare & Medicaid Services would not be able to use continuing resolution funds to administer payments based on any rate calculated on the basis of the Patient Protection and Affordable Care Act, “which is to say virtually all rates.”

The letter says that where the PPACA effectively repealed prior payment methodologies and replaced them with new ones, H.R. 1 “would seem to preclude any payments for the items or services at issue.”

For example, the letter says, PPACA replaced the old statutory provisions governing payments to MA organizations with new provisions, including a freeze in payment levels in 2011.

“Using CR funds to make payments to MA organizations under the new PPACA provisions would be prohibited by H.R. 1,” the letter says.

“Moreover, there would not appear to be legal authority to pay MA organizations under the prior payment methodology, given that this methodology was repealed in the PPACA,” the letter says.

“This would seem to mean that payments to MA organizations would have to be suspended, risking a significant disruption in services to beneficiaries enrolled in the MA,” the letter adds.

In the event that any prior payment methodologies that have not been fully repealed by the PPACA could be decoupled from all of the additions to the Medicare statute made by the PPACA, “CMS would have to perform extensive analyses to determine whether it could be permissibly make payments of some sort,” the letter says.

But, even if CMS could do so, “It would be required to undertake rulemaking to establish new rates under each payment system, as the existing rates are all in some way dependent of PPACA authorities,” the letter says.

In an analysis by Chris Jacobs, the Senate Republican Policy Committee says that, “First and foremost, procedural concerns mean you can’t authorize changes to mandatory programs like Medicare in a discretionary appropriations bill.”

For this reason, he says, “the Congressional Budget Office does not assume any of the secretary’s scenarios will happen.”

The CBO’s list of changes to mandatory programs in H.R. 1 contains zero changes to mandatory spending programs within the CMS that would occur if the House-passed CR were enacted,” Jacobs says.

“Simply put, CBO says that H.R. 1 will make zero changes to spending on Medicare benefits, contrary to the Secretary’s statements that HHS may need to shut down the Medicare Advantage program if the bill is enacted,” Jacobs says.