Senators offer bipartisan plan to trim Medicare costs

Posted June 28, 2011, at 6:07 p.m.

WASHINGTON — A bipartisan team of senators aims to raise the Medicare retirement age to 67 and require the wealthy to pay more for their care as part of the White House-congressional effort to dramatically reduce federal deficits.

The plan, authored by Sens. Joseph Lieberman, I-Conn., and Tom Coburn, R-Okla., would save an estimated $600 billion in the cost of Medicare, the government’s health care program for the elderly and some disabled. While the plan is expected to meet strong resistance, some of its elements could be incorporated into a bipartisan deal.

The senators’ proposal would increase the Medicare eligibility age, now 65. It would go up two months each year, beginning with people born in 1949, until it reaches 67 in 2025. The age would then remain 67. If the 2010 federal health care law is repealed or overturned, as Republicans want and courts are considering, the age would remain 65.

The senators’ effort comes as President Barack Obama plans another round of debt reduction talks Wednesday with Senate Democrats. There was no word on when he might talk to Republicans. Obama met separately Monday with Senate Majority Leader Harry Reid, D-Nev., and Senate Republican leader Mitch McConnell of Kentucky.

Any deal would be part of legislation to raise the nation’s $14.3 trillion debt ceiling. Without an increase, administration officials estimate the government will exhaust its borrowing authority by Aug. 2, which could lead to a default on U.S. debts, chaos in financial markets and a new recession.

Medicare’s trust fund is expected to be insolvent in 2024, and its projected annual costs are a major driver of federal spending. The program is expected to serve 48.9 million people this year, and grow to serve about 64 million by 2021.

Reaction to the Lieberman-Coburn plan was lukewarm. McConnell praised the senators for coming up with a plan, but didn’t endorse it. Reid called it a “bad idea,” while House Minority Leader Nancy Pelosi, D-Calif., said it was “unacceptable, especially for struggling middle-class Americans.”

Republicans want to dramatically revamp Medicare.

House Republicans voted earlier this year for a plan to privatize the system. Under it, people who retire after 2021 would choose from a list of private “guaranteed coverage options” and get federal help with the cost.

Democrats concede that Medicare savings are needed, and the 2010 federal health care law included changes expected to save about $500 billion over 10 years. The Democrats’ plan includes a mechanism to pare Medicare’s spending if its growth rate rises above a set amount, penalizing hospitals for “excessive readmission rates” and creating new, potentially more efficient ways for people t o get medical care.

The Lieberman-Coburn plan includes:

• A single combined annual deductible of $550 for both Part A (hospital) and Part B (generally physician) Medicare plans.

• An annual out-of-pocket limit of $7,500. Currently there is no limit, which means a catastrophic illness could exhaust a consumer’s savings.

• New requirements that wealthier people pay more out of pocket. Those levels would reach $12,500 for individuals earning $85,000 to $107,000 and married couples making $170,000 to $214,000. At the highest end, couples earning $320,000 or more would pay up to $22,500.

• New policies for “Medigap” coverage. About one in five beneficiaries gets supplemental coverage to pay deductibles or co-pays. The Lieberman-Coburn plan would bar such policies from paying any of the first $550 of liability, and would limit other coverage.

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