By Jennifer Haberkorn & Matt Dobias, Politico, July 19, 2011
The bipartisan proposal to end the debt-limit crisis that was seemingly gaining traction on Capitol Hill and at the White House Tuesday would look to cuts and reforms in health care spending to save more than $200 billion.
The plan unveiled by the Senate’s newly revived "Gang of Six" would pay for a complete overhaul of the flawed Medicare physician payment formula, erase a long-term-insurance program created under last year’s health reform law and enact medical malpractice reform.
Several leaders from both parties said the plan could be a vehicle to rein in spending and ultimately raise the debt ceiling. President Barack Obama cautiously praised the proposal, which came together with the speed and momentum that only a crashing deadline could provide.
"I think we are now seeing the potential for a bipartisan consensus around what that would take [to cut the deficit]," he told reporters at the White House on Tuesday. "It will be hard, it will be tough. There’s still going to be a lot of difficult negotiations that have to take place in order for us to actually get something done."
"But the hope is everybody seizes this opportunity," he said.
It’s unclear how the spending cuts would be split between Medicare and Medicaid. Any changes to either program are likely to be strongly contested, particularly in the wake of the release of the House Republican budget, which gave Democrats the political advantage in the debate over the future of Medicare.
All told, the Senate package would save some $3.7 trillion in federal spending over the next decade while giving lawmakers a pathway to tackle medical liability lawsuits, fraud and abuse in Medicare and Medicaid and, more broadly, Social Security.
The plan calls for the repeal of the health reform law’s CLASS Act, a long-term-care-insurance program that was championed by liberal Democrats and was considered a legacy of the late Sen. Ted Kennedy.
Many Republicans question whether it is actuarially sound, and even Health and Human Services Secretary Kathleen Sebelius has said the program’s premiums and benefits most likely would need to be recalculated.
Obama’s bipartisan fiscal commission, led by Alan Simpson and Erskine Bowles, recommended that the program be eliminated.
The Gang of Six plan also includes medical malpractice reform, a proposal favored by Republicans. The specifics of that plan would be left to committees, too.
The proposal — hatched by Senate Budget Committee Chairman Kent Conrad (D-N.D.) with anywhere from four to five other senators — came together with surprising speed after having been left for dead just weeks earlier, when Coburn left the group. He rejoined it just before the group outlined its latest plan.
Majority Leader Harry Reid (D-Nev.) threw cold water on the proposal Tuesday afternoon, warning that such an ambitious plan would take time for the Congressional Budget Office to analyze. The debt ceiling is due to be hit on Aug. 2.
"My staff got a call from [CBO Director] Doug Elmendorf," Reid told reporters Tuesday. "He said, 'I understand Sen. Reid is talking about putting a couple of hundred billion dollars of cuts in mandatory programs. You should tell him it takes two weeks for CBO to score that.'"
"In the next 24 hours, you are going to see a significant portion of the Senate come behind this, bipartisan, maybe 60 members," Sen. Tom Coburn (R-Okla.), who helped shape the plan, told reporters Tuesday morning. "We’ll see how things roll."
A bipartisan group of lawmakers began to embrace the proposal after a morning meeting on Capitol Hill to discuss the specifics.
"I’m excited," said Sen. Mark Udall (D-Colo.). "Let’s go. It’s real and it has substance."
“I think this will become the centerpiece of the debate,” said Sen. Tom Carper (D-Del.).
Lawmakers admit it’s going to be difficult, though, and the specifics have yet to be sorted out. The $202 billion in health care cuts — $116 billion more than the gang’s original proposal — haven’t been specified. The committees of jurisdiction will have to figure out what gets cut — a move favored by hospital and physician groups. If the committees fail to find savings in those entitlement programs, a special congressional committee would be tasked to do so.
"Look, none of this is going to be easy," Udall said. "None of this is going to bring a smile to anyone’s face. But [the Gang of Six] thought this through. They’ve distributed the pain equally — which the best plan always does that."
Carper said the savings can come from waste and fraud. "The GAO tells us that we spent last year $50 billion in improper payments in Medicare," he said.
"The plan has moved significantly, and it’s where we need to be," Coburn said. "It’s a start. This doesn’t solve our problems, but this creates the way forward to where we can solve our problems."