* Republicans seek political cover from Medicare fallout
* Democrats insist Ryan plan must be off the table first
* Compromise perhaps around doctor payment structure
By Donna Smith
WASHINGTON, June 8 (Reuters) - Republicans are pushing Democrats to accept some cuts to Medicare during talks over the U.S. deficit as a way to neutralize the political fallout from their unpopular plan to privatize the healthcare program.
Medicare is one of the two main stumbling blocks in negotiations between the White House and Congress over spending cuts needed to reduce America's $1.4 trillion deficit.
While there has been little progress toward bridging the gap, one potential compromise may surface around a proposal to revamp the payment structure that consistently threatens doctors with huge pay cuts, analysts and some Democrats say.
"If they are going to come up with a bipartisan agreement, the doc fix should be in there," said Democratic Representative Xavier Becerra.
An agreement on that point would actually cost money, about $300 billion over 10 years, but it would allow Republicans to change the subject and give Democrats a chance to show renewed commitment to the popular Medicare program for the elderly even as negotiators trim other healthcare spending.
"It helps change the conversation (on Medicare), which is what Republicans definitely want," said David Kendall of Third Way, a centrist think-tank. "For Democrats, it helps preserve the program."
More Americans oppose the Republican plan to privatize Medicare than support it, according to a Reuters/Ipsos poll released on Wednesday. [ID:nN08232681]
Voter anger over the Republican plan helped Democrats win in a traditionally Republican district of New York state last month. Now, Republicans just want to make the Medicare issue go away before the 2012 presidential and congressional elections.
"Their best bet is to get a deal on Medicare that takes it off the table as a political issue," said John Feehery, a former Republican congressional aide now with Quinn Gillespie Communications.
Talks will pick up again on Thursday as negotiators led by Vice President Joe Biden try to get a deal on spending cuts in exchange for raising the country's $14.3 trillion debt ceiling before an Aug. 2 deadline.
Biden's group has made little progress because of entrenched positions on Medicare and taxes.
Democrats insist Republicans jettison the proposal by Representative Paul Ryan to revamp Medicare into a voucher-like system for future retirees to buy subsidized health plans from private insurers.
"It's impossible to get a debt reduction deal unless the Republicans take their plan to end Medicare as we know it off the table," Senator Charles Schumer told reporters.
Republicans have refused to discuss tax increases.
So far Democrats, who suffered huge setbacks in last year's congressional elections in part due to Medicare cuts included in the healthcare overhaul law, are digging in their heels.
Republican Senator Jon Kyl, one of the Biden group negotiators, said on Tuesday a deal on Medicare could help soothe financial market worries over long-term U.S. debt.
"If we don't create some way to save Medicare for example, then I think the markets could interpret our results as a failure and go south pretty fast," Kyl told reporters.
Federal spending for Medicare is expected to nearly double in 10 years from $520 billion in 2010 to $1.02 trillion in 2021, according to the Congressional Budget Office.
The number of people drawing Medicare benefits will grow to almost 60 million by 2021 from 45 million in 2010. Meanwhile, healthcare costs have been rising faster than the rate of inflation.
But budget negotiators face resistance from healthcare advocates and industry providers as they weigh cuts to Medicare and the Medicaid health program for the poor. Hospitals, targeted for Medicare payment changes under last year's healthcare overhaul, have drawn a line in the sand.
They launched an ad campaign aimed at lawmakers urging "no more cuts to hospital care," arguing they already are absorbing $155 billion in payment reductions and that Medicare and Medicaid pay hospitals less than the cost of providing care.
Pharmaceutical manufacturers are fighting proposals by President Barack Obama to save Medicare money by negotiating drug prices. They argue that would be the same as imposing federal price controls and hurt innovation.
Doctors, who face a 30 percent Medicare pay cut in January unless Congress acts to stop it, want a revamp of the payment structure.
Because it is such a big budget item, Congress has repeatedly acted to only temporarily stop pay cuts. Doctors want a permanent fix to take away the ongoing threat. (Reporting by Donna Smith; Editing by John O'Callaghan)