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On Medicare Spending, a Role Reversal

Seniors' Concerns

The mild response to the cuts demonstrates the strategic value of Obama's decision to ally with groups that have blocked efforts to change the program in the past. Seniors, however, are far less sanguine.

Americans 65 and over have long been among those most critical of Obama's reform plans, and a key factor is their concern about Medicare, according to an ABC News-Washington Post poll conducted this month. Fifty-six percent of seniors said they thought reform would weaken the Medicare program. With seniors likely to make up nearly 20 percent of the electorate in 2010, Republicans see Medicare as a potent campaign issue. In the Finance Committee, GOP senators moved repeatedly to strip the spending cuts from the bill.

Obama and other Democrats have assured seniors that the cuts will skim off a small margin of waste and inefficiency without affecting services. They say the cuts will actually strengthen a program that is rapidly outgrowing its primary source of funding -- the payroll tax -- and threatens to exhaust the surplus taxes accumulated in the Medicare trust fund by 2017. Cutting payments to providers, they argue, can help stabilize Medicare finances.

That's what happened after the last major assault on Medicare spending, when Clinton and a Republican Congress approved a package of cuts remarkably similar to the one now on the table. The Balanced Budget Act of 1997 was expected to save $112 billion over five years -- a 9 percent reduction in projected spending on par with the 10 percent in the Baucus bill. The cuts wound up saving so much more than expected that Congress reversed some of them in 1999 and 2000, said Jon Gabel, a senior fellow at the National Opinion Research Center.

Service to seniors was largely unaffected, said Robert Berenson, a Medicare expert at the left-leaning Urban Institute who also serves on the congressional Medicare Payment Advisory Commission. "There was anguish from the hospital industry, but I don't think anybody documented quality problems. And it dramatically added to the solvency of Medicare," he said, extending the life of the trust fund by 15 years.

Some budget analysts worry that industry groups, though confident now, may find it difficult to live up to their part of the bargain. The Baucus bill would create an independent commission charged with ratcheting payment rates even lower in the years to come. Others say the cuts, even if they stand, are insufficient to fix a program facing the twin burdens of a rapidly growing population of retirees and rampant health-care inflation. Unless health reform delivers on Obama's promise to restrain the overall cost of health spending, Medicare will undoubtedly stay on the chopping block.

"There's an imperative to bend the curve faster than it's probably possible to do in a democratic society," said Urban Institute President Robert Reischauer, a former CBO director. "We're starting down the correct paths . . . but at any point Congress could act to halt our travel down those paths. For the next few years, there's a great degree of uncertainty about all of this."

Polling director Jon Cohen contributed to this report.

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