UPDATE 2-Obama deficit panel wrestles healthcare 'gorilla'

Thu Nov 18, 2010 6:22pm EST

* Voucher program proposal for Medicare debated

* Medicare proposal seems "unlikely" - commission's Stern

* Wave of alternative proposals from private groups (Adds Bowles, Simpson comments)

By Kevin Drawbaugh

WASHINGTON, Nov 18 (Reuters) - A proposal to overhaul the costly Medicare and Medicaid health programs met opposition on Thursday in a closed-door meeting of a presidential commission looking for ways to balance the U.S. budget.

As private groups studying the problem of the federal deficit unleashed a wave of alternative plans, President Barack Obama's commission convened again on Capitol Hill with just 12 days left before it must issue a final report.

Topping the panel's agenda on Thursday was a proposal to convert Medicare into a voucher program in a decade and turn Medicaid over to the states with federal grant funding.

"The most difficult thing to deal with are the healthcare accounts. That is the 800-pound gorilla in the room," said Democratic Senator Kent Conrad, chairman of the Senate Budget Committee and a commission member, as he left the meeting.

"Healthcare accounts is where the biggest part of our unfunded liability is; it's where the biggest part of our out-year deficits is. It is the most difficult," he added.

As he exited the session lasting less than two hours, commission member Andy Stern, a former labor leader, said the Medicare-Medicaid proposal seemed "unlikely."

"It's hard to imagine that we're going to do a system for seniors that is not going to stop the overall rise in healthcare for everybody," said Stern. "So it seems unlikely."

Medicare and Medicaid are major contributors to the $1.3-trillion federal deficit's projections of massive increases in the years ahead as well as the fast-mounting $13.6-trillion national debt.

Voters vented their frustration at the polls this month about Washington's river of red ink.

RIVLIN, RYAN TEAM UP

Commission member Alice Rivlin, formerly vice chairman of the Federal Reserve, and Republican Rep. Paul Ryan have proposed converting Medicare to a voucher program, with beneficiaries after 2021 receiving vouchers for private insurance from companies involved in a new insurance exchange.

Medicaid, the healthcare program for the poor, should be shifted to the states with federal grants, they proposed.

The Rivlin-Ryan plan is one of many being considered by the commission, headed by Erskine Bowles and former Republican Senator Alan Simpson. The two released their own plan last week. They said it would bring $4 trillion in deficit reduction through 2020.

"Who knows if we'll get to the promised land, but we feel good about where we are," Bowles, former chief of staff for President Bill Clinton, told reporters after the meeting. "We've come out with a co-chairs' plan ... You won't see a weaker plan, for sure. But you'll see some refinements," he said. The commission will meet next publicly on Nov. 30.

Bowles and Simpson are now fine tuning their plan, based on input from others on the 18-member commission. "It won't be a watered-down thing like what happens in Washington all the time, where you start bold and then you get cut to ribbons ... It won't be pap. It won't be milk sop," Simpson said.

As mandated by Obama, the panel's report must win the support of 14 members before it can go to Congress for a vote.

"At some point there will be a vote" on the commission itself, Simpson said.

(For a Factbox on the Bowles-Simpson plan, double-click on [ID:nN10213109])

Two private groups have unveiled comprehensive deficit-cutting plans in recent days, calling for changes to Social Security and sharp budget cuts. Two more plans are expected early next month from liberal groups.

The wave of plans and proposals has encouraged Bowles and Simpson, who have put forward their own set of ideas. But many analysts are pessimistic about the chances for meaningful deficit cutting anytime soon in a deeply-divided Congress.

Democratic Rep. Jan Schakowsky, a commission member who has unveiled her own deficit-fighting plan, expressed some doubt about the commission's final outcome as she left the meeting. "I really don't see how this all gels into a comprehensive proposal yet," she told reporters.