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updated 11/17/2010 9:22:39 PM ET 2010-11-18T02:22:39

President Barack Obama's deficit commission on Wednesday debated a dramatic plan to gradually turn Medicare from a system in which the government pays most beneficiaries' medical bills into a program in which seniors would purchase health insurance with government-issued vouchers.

Current Medicare beneficiaries wouldn't be affected, nor would future enrollees age 55 or over.

Image: Rep. Paul Ryan, R-Wisc.
Brendan Hoffman  /  Getty Images
Rep. Paul Ryan, R-Wisc.

The plan by Rep. Paul Ryan, R-Wis., and Democratic economist Alice Rivlin of the panel would seem to face steep odds with most other panel Democrats.

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Ryan came under assault by Democrats and President Obama during this year's campaign over a similar plan, which would gradually turn the traditional "fee for service" Medicare program into a less generous voucher system that would lose purchasing power as time goes on.

That would mean seniors would have to pay higher premiums or receive less extensive health coverage.

Image: Alice Rivlin, former Federal Reserve vice chairman
Jonathan Ernst  /  Reuters
Alice Rivlin, former Federal Reserve vice chairman

Panel Democrat Alice Rivlin — a deficit hawk — endorsed the plan, which would not change the Medicare programs for current enrollees or for those 55 and older. The new system would start in 2021. The eligibility age for Medicare would gradually increase from 65 to 67.

Ryan's plan is tough medicine but the future chairman of the House Budget Committee says it is needed to prevent Medicare from bankrupting the country.

"Medicare's open-ended, fee-for-service model distorts the health-care market, inflates costs and invites fraud and abuse," Ryan wrote in a post on The New York Times website. "With tens of trillions of dollars in unfunded promises, Medicare is on an unsustainable trajectory, and yet 'do-nothing' politicians irresponsibly insist the program remain on autopilot."

Democrats say the approach indiscriminately slashes Medicare.

"The plan simply mechanically cuts Medicare by increasing its vouchers more slowly than health care costs," former White House Budget Director Peter Orszag said in July.

The Ryan-Rivlin blueprint would also, in 2013, overhaul the Medicaid program for the poor and disabled by providing block grants to states instead of the current federal-state partnership.

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For both Medicare and Medicaid, the yearly increases in the cost of the new programs would be capped at the rate of growth of the economy plus one percentage point.

Deficit panel member Sen. Kent Conrad, D-N.D., withheld judgement on the plan but pointed reporters to a Congressional Budget Office analysis that says the plan would mean seniors would have to pay higher premiums in the private market or choose insurance plans with less extensive coverage.

On Medicaid, the nonpartisan CBO also says states would probably provide less generous health care coverage to the poor.

Copyright 2010 The Associated Press. All rights reserved. This material may not be published, broadcast, rewritten or redistributed.

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