Scenarios: Deficit panel talks loom for Medicare, Medicaid

WASHINGTON The government's soaring healthcare bill will be high on the agenda of Congress's new deficit-cutting "super committee," which has been assigned the task of finding by November 23 at least $1.2 trillion in savings.

Few major structural changes are expected for the Medicare and Medicaid health insurance programs given the time constraints.

The 12 committee members -- six Democrats and six Republicans -- also are unlikely to seek more than small-scale changes in spending, if any at all, to the initiatives created under the 2010 healthcare law signed by President Barack Obama, one of his key legislative achievements.

The committee, formed this month under the last-minute debt-ceiling compromise between Obama and Congress, is far more likely to seek narrower but tangible results, according to analysts, former policymakers and congressional aides.

Committee members have said they expect to work from existing proposals from independent groups, Republican and Democratic lawmakers, Obama's 2010 bipartisan deficit commission and others.

Here are some scenarios of how events might unfold.

IF THERE'S NO DEAL

The partisan mood in Congress could make it difficult for the committee to reach any agreement on a deficit-cutting package, or for Congress to approve a deal. Much may depend on how tough a line the White House urges Democrats to take on entitlements if Republicans refuse to include revenue increases.

Automatic cuts that will kick in if there is no agreement would not touch Medicaid, the $427 billion a year health insurance program for the poor that is funded jointly by federal and state governments and serves about 60 million beneficiaries.

Medicare, the $520 billion a year federal health insurance program for the elderly, would see a relatively modest $120 billion cutback over 10 years under automatic reductions.

Analysts say the Medicare cuts would impact healthcare providers, not the program's 48 million beneficiaries. That could help avoid a backlash from elderly voters who might otherwise seek retribution at the ballot box for any reductions in Medicare benefits.

But the provider cuts, amounting to no more than 2 percent of total Medicare spending, would have a direct impact on the bottom lines of companies like UnitedHealth Group and Humana Inc that depend on Medicare spending for revenues. The prospect for reductions has already unsettled stocks on Wall Street.

IF THERE IS A DEAL

Speculation about the committee's ability to reach agreement centers on whether any lawmakers would be willing to break party lines.

Some analysts believe Democratic Senator Patty Murray could cross party lines to help Republicans stave off cuts in defense spending, a move that could mean deeper reductions in healthcare programs.

Murray represents Washington state, home to defense contractor Boeing Co, which has given her more than $172,000 in campaign contributions from corporate and employee donations, according to the independent nonpartisan Center for Responsive Politics.

But analysts also note Murray's 2012 role as head of the Democratic Senatorial Campaign Committee helping to get Democrats elected to the Senate, which could constrain her from supporting changes to Medicare and Medicaid that might hurt her party's prospects in the congressional and presidential elections.

Some conservatives hold out hope that Republicans on the super committee will move the debate in the direction of House of Representatives Budget Committee Chairman Paul Ryan's proposals to convert Medicare into a premium-support program for purchasing private insurance and Medicaid into a block-grant system for states.

But committee members are more likely to make progress by avoiding the big ideological battles that are becoming set pieces for the 2012 campaign. Instead, the focus is expected to be on savings capable of winning approval from Congress and a favorable reception from the nonpartisan Congressional Budget Office, which is expected to veto any panel recommendations.

Analysts say the committee could look to the following areas for billions of dollars in potential savings:

MEDICARE

* A further expansion of means-testing to increase premiums and other costs for higher-income beneficiaries;

* An increase in the age of eligibility, currently 65, for people who are healthy;

* A unified cost-sharing rate for Medicare Part A, which covers inpatient care at hospitals and rehabilitation facilities, and Part B, which covers doctor services and outpatient care;

* Greater authority for the Centers for Medicare and Medicaid Services, the agency of the U.S. Department of Health and Human Services that oversees the two programs, to combat waste, fraud and abuse;

* Stepped-up efforts to encourage greater coordination of care and reward healthcare providers for good patient outcomes rather than services;

* An improved payment formula for physicians;

* A new growth target for Medicare spending per beneficiary pegged to gross domestic product;

* A mechanism to leverage Medicare's purchasing power to stem increases in prescription drug prices.

MEDICAID

* A single matching formula for federal contributions to states for Medicaid and the Children's Health Insurance Program, which covers low-income children who do not qualify for Medicaid;

* A clampdown on states' use of taxes levied on healthcare providers, which critics say some states have used to inflate their Medicaid contributions in an effort to draw additional federal dollars;

* Placement of people who are eligible for both Medicare and Medicaid into Medicaid managed care programs;

* A long-term budget limiting Medicaid expenditures per enrollee to the rate of economic growth;

* An upper limit on payments for durable equipment;

* Tighter management of healthcare providers and Medicaid beneficiaries involved in high levels of prescription drug use.

2010 HEALTHCARE LAW

* A limited delay in federal subsidies that would augment the cost of coverage in state health insurance exchanges for lower-income beneficiaries;

* A delay in the expansion of Medicaid to new enrollees with incomes of up to 133 percent of the federal poverty line;

* Reduction or elimination of small-scale expenditures ranging up to $50 million for patient education, health provider training and other relatively small-scale projects.

(Editing by Will Dunham)