Image: Joe Biden, Ray LaHood
Evan Vucci  /  AP
Vice President Joe Biden, right, and Transportation Secretary Ray LaHood, left, walk to a train at Union Station in Washington, Tuesday, Feb. 8, 2011. Biden is leading talks with congressional Republicans to increase the nation's debt ceiling.
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updated 6/15/2011 3:03:26 PM ET 2011-06-15T19:03:26

As Vice President Joe Biden and congressional negotiators hunt for budget cuts, major Medicare changes that could squeeze billions in savings got a boost Wednesday from a nonpartisan panel of experts that advises lawmakers.

Those changes are already under consideration in the budget talks, officials say.

One idea would revamp Medicare's outdated copayments and deductibles to provide better protection against catastrophic expenses, but it could lead to seniors paying a bigger share of the cost for some everyday services. The goal is to save taxpayers money by discouraging overtreatment.

The impact on individual seniors is less clear. Few details are available, but such changes could create winners and losers.

Slideshow: Raise the Debt Ceiling

Seniors with high medical costs would gain from having a limit on their financial exposure, protection that Medicare doesn't now provide. Those who see the doctor often for more manageable problems could end up paying more. Overall, premiums for private insurance that many seniors get to fill in Medicare's gaps could become more affordable.

The other idea under consideration would shift nearly 9 million high-cost beneficiaries with both Medicare and Medicaid into managed-care insurance plans, to better coordinate services and cut duplication.

The Medicare Payment Advisory Commission did not endorse any specific approach, but its traditional midyear report to Congress made clear that both issues are overdue for a fix.

"The status quo ... has led to care that is often not coordinated, sometimes inappropriate, and occasionally risky to patients," said the report, referring to Medicare's traditional fee-for-service benefit. "It has also left beneficiaries with rising ... premiums and out-of-pocket costs and has left taxpayers with the unsustainable burden of financing the program."

The aim should be "to give beneficiaries better protection against high (out-of-pocket) spending and to promote incentives for them to weigh their use of discretionary care, without discouraging needed care," said the report from MedPAC, as the commission is known.

Officials familiar with the negotiations between Biden and leading lawmakers of both parties said the two Medicare options are under consideration. The officials spoke on condition of anonymity because the budget talks are confidential.

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Biden's goal is to find savings that will help the administration reach a deal with congressional Republicans to increase the nation's $14.3 trillion debt ceiling. That's needed to prevent the government from lurching into an unprecedented default on its interest payments to creditors, which could destabilize the already wobbly economy.

Prospects for the talks are uncertain, since both political parties are locked into their positions. House Republicans are on record that they will not vote to approve a debt increase without deep spending cuts. Democrats, meanwhile, are taking a hard line against any reduction in Medicare benefits, including increased copayments for visits to doctors and hospitals.

A sweeping overhaul of Medicare and Medicaid backed by House Republicans seems to have no chance. Instead, the budget negotiators are looking at a list of proposals outlined last year by President Barack Obama's deficit reduction panel. Most involve cuts in payments to medical service providers and drug companies, but some would affect seniors directly.

Video: Debt talks resume (on this page)

The deficit panel estimated that revamping Medicare's cost-sharing rules would save $110 billion from 2012 to 2020. Additional savings would come from limiting the ability of private insurers to fully shield seniors from Medicare's out-of-pocket costs. Many seniors purchase private "Medigap" coverage that caps their total annual costs and allows them to escape a bewildering assortment of Medicare deductibles and copayments.

For example, Medicare's hospital deductible is $1,132 for the first 60 days, while the annual deductible for doctor visits is $162. There is no copayment for the first 20 days in a nursing home, but beneficiaries must pay full cost after 100 days.

Obama's deficit panel recommended a single annual deductible of $550 for hospital care and medical services, with a 20-percent copayment on health spending above the deductible. The copayment would drop to 5 percent for costs over $5,500. Beneficiaries would pay no more than $7,500 a year total out-of-pocket, a consumer safeguard now missing from Medicare.

But there would be a trade-off.

Under the panel's proposal, Medigap insurance plans would be prohibited from covering the first $500 in cost sharing, and could only cover half of the next $5,000. Except for low-income seniors and some with employer-provided retiree coverage, beneficiaries would be responsible for at least $500 of their medical expenses, and as much as $7,500.

The second proposal, shifting high-cost beneficiaries into Medicaid managed care plans, would save $12 billion from 2012 to 2020. This group includes many low-income people, patients in nursing homes, and individuals with multiple complicated health problems. They receive coverage both through Medicare and Medicaid at a cost well above that for typical beneficiaries in either program.

Wednesday's MedPAC report cautioned that both of the changes would take time to carry out, and will require close attention to prevent unintended consequences for seniors and disabled beneficiaries.

Copyright 2011 The Associated Press. All rights reserved. This material may not be published, broadcast, rewritten or redistributed.

Video: Debt talks resume

  1. Closed captioning of: Debt talks resume

    >> vice president is stepping up the pace of negotiations over the debt limit. mr. biden returns to the capital for a 2:00 meeting coming up with two more sessions planned over this week. with the july fourth recess looming, the parties are more than a trillion dollars apart. ken joins us. if you can find a trillion dollars, maybe you can solve the problem. they really do have a big gap to fill. what's so striking, ken, if you talk to people involved from the vice president's side and and the republican's side, they seem to be getting along. that cantor and biden are talking. this is not as contentious a session as you might have expected.

    >> that's right. that's the name of the game . both sides have an interest in striking a deal and striking a deal well before the deadline avoiding an 11th hour showdown like we saw over the budget recently. but getting along and finding another trillion dollars in cuts are different matters and with republicans being -- with both sides being unwilling to touch entitlements, defense spending , democrats willing less willing to touch domestic spending, social welfare spending, you see where the challenge is.

    >> the president told ann curry is that the republicans are resistant to any talk about revenue. they've made that clear on the record, off the record. the democrats don't want to go for some of these big budget cuts. one thing that does strike me as maybe we're all being spun, maybe each sides wants to avoid being blamed for the failure, the breakdown that leads to a debt ceiling crisis. so everyone's talking about being cozy many the room, but they really aren't getting anywhere.

    >> i don't know.

    >> that seems to be sort of the standard thing. there are these very hard positions that we've seen. you don't have to look any further than the breakdown, the impasse that was reached by this gang of six that looked like they were on pace toward a very significant deal that would cut $4 trillion in spending. but just touched a little bit too much in the entitlement programs and fell apart.

    >> thank you.

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