Entitlements Split Democrats

By NAFTALI BENDAVID and JANET HOOK

WASHINGTON—With deficit talks kicking off in earnest, Democrats are divided on the magnitude of changes they would accept when it comes to overhauling Medicare and other safety-net programs.

The party is split between those who would agree to major adjustments, including increasing premiums for wealthier beneficiaries and raising Medicare’s eligibility age, and those who rule out such moves altogether. In the middle is a group that would tolerate some cuts as long as they didn’t hit beneficiaries directly.

White House aides and congressional staffers held their first meeting Monday, three days after President Barack Obama and congressional leaders agreed to aim for a deal that would make a “down payment” this year on deficit reduction, followed by more ambitious changes to the tax code and safety-net programs next year.

Democratic and Republican staffers on Capitol Hill have begun discussing what aides say are likely to be separate proposals they will present to Mr. Obama and the congressional leaders next week.

The Democratic plan is expected to include allowing the Bush-era tax cuts to expire for those making $250,000 or more, aides said. Republicans say they have conceded the need to raise tax revenue, but complain Democrats are making no similar concessions when it comes to safety-net programs.

Democrats respond that it makes little sense for them to incorporate such concessions into an initial offer.

he talks have just begun, and Democrats’ ultimate position on Medicare—the federal health plan for the elderly—and Medicaid—the health system for low-income people—likely will hinge on the size of any deal and what revenue increases Republicans agree to.

Some Democrats are already ruling out any benefits cuts, citing the party’s recent election victory as an endorsement.

“You can’t go after the elderly, many of whom are barely hanging on economically,” said Sen. Bernie Sanders of Vermont, an Independent aligned with the Democrats. “You can’t go after the sick. You can’t cut Medicare.”

Several unions, in a campaign aimed partly at centrist Democrats, are launching an ad campaign this week designed in part to protect entitlement programs. The ads, from the American Federation of State, County and Municipal Employees, the Service Employees International Union and the National Education Association, will target senators in Colorado, Missouri and Virginia, and House members in Missouri, Pennsylvania and Alaska.

The Center for American Progress, a liberal group with ties to Democrats and the White House, is staking out a more centrist view and has outlined $385 billion in potential savings from safety-net programs, ones that mostly don’t hit beneficiaries directly. These would include actions such as increasing competitive bidding among service providers, reducing fee-for-service payments and rewarding states for keeping costs low.

Sen. Dick Durbin (D., Ill.) is among those willing to contemplate more far-reaching compromises. Mr. Durbin has spoken approvingly of charging wealthier Americans higher Medicare premiums, a proposal that is anathema to some liberals who see it as a step toward dismantling the program.

“I think that is a reasonable path to look at, that the higher-income retirees in America will either pay a little more into Medicare or take a little less out,” Mr. Durbin said. “There are ways to save money in those entitlement programs that still preserve the basic programs.”

Mr. Durbin also didn’t rule out raising the Medicare-eligibility age above the current 65, though he said he would have to be sure no retirees would be left vulnerable.

“I’m open to it, but boy, I have to be convinced,” he said. In talks in summer 2011 over raising the debt ceiling, President Obama and House Speaker John Boehner (R., Ohio) seriously discussed such a move.

Mr. Obama, in the latest round of budget talks, has signaled the possibility of making significant changes to entitlement programs, people in the meetings say, although he hasn’t been specific. Democrats in Congress acknowledge they will likely accept such moves if Republicans also make real concessions.

Changes in entitlement programs such as Medicare and Medicaid are a key part of the budget talks, given they are the sources of the budget’s long-term problems. While Democrats say they won’t agree to a deal that doesn’t raise a significant amount of revenue, and are pushing to exclude Social Security from the talks, Republicans are equally dismissive of any agreement that doesn’t overhaul safety-net programs.

Senate Minority Leader Mitch McConnell (R., Ky.) said recently on the Senate floor that Republicans would accept revenue increases “if Democrats are willing to reduce spending and strengthen entitlement programs.”

The Center for American Progress recently outlined changes to Medicare and Medicaid it suggested liberals can live with. Ezekiel Emanuel, a former Obama administration official and one of the report’s authors, said health services should be paid according to a patient’s condition or outcome, not for each medical service provided. He also said the programs would benefit from more competitive bidding and that states should be rewarded when they lower costs.

“We don’t want the Republican idea that under rubric of ‘entitlement reform’ you dismantle or privatize the programs,” said Mr. Emanuel, who heads the Department of Medical Ethics and Health Policy at the University of Pennsylvania. “But we also don’t agree with saying there is no real long-term problem. Both of those extremes are misguided.”

Mr. Durbin said Mr. Emanuel helped convince him that changes could be made to Medicare that preserve the program’s mission. He said other Democrats should do similar consultations.

“I think what my caucus needs to do is what I’ve done—hear this from someone you trust,” he said.

A version of this article appeared November 19, 2012, on page A4 in the U.S. edition of The Wall Street Journal, with the headline: Entitlements Split Democrats.

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