Although the House GOP plan to replace Medicare with a voucherlike system got shunted aside last week, that may not be the end of the story. Embedded in both the Republican plan and in Obama's counterproposal is the idea of putting limits on the growth of the half-trillion-dollar-a-year program -- and then enforcing them.
High-level deficit negotiations resume today under the stewardship of Vice President Joe Biden, and tackling health care spending is critical to what could become the year's most important legislation.
The two sides differ sharply on how that should be done. Obama says the GOP would leave frail seniors at the mercy of profit-driven insurance companies. Republicans say he would empower unaccountable bureaucrats to ration care.
If they can meet in the middle on the idea of an enforceable limit, it could open the door for major changes. Over time, that could mean less money for hospitals, doctors, drug firms and other providers and higher out-of-pocket expenses for retirees.
Health care costs of an aging American population are the biggest challenge facing Biden and the deficit negotiators. Tiptoeing around the politically volatile issue won't impress financial markets that are nervous over the $14 trillion national debt. Red ink ballooned as a consequence of two wars, tax cuts and the recession, and the government now is borrowing about 40 cents of every dollar it spends.
"We're at a point where we really need to get a solution," said Rep. Dave Camp (R-Mich.), chairman of the Ways and Means Committee. "In other times when we've had this debate, we haven't had the debt crisis."
Medicare is the largest single bill payer in the $2.5 trillion U.S. health care system. The way it works now, annual increases in the cost of care for 47 million elderly and disabled people basically get passed on to taxpayers. If spending surges in one part of the program, officials try to tamp it down in future years.
Obama's approach and the House GOP budget by Rep. Paul Ryan of Wisconsin would both try to limit the amount of taxpayer money going into Medicare. But if the limit is too tight, the welfare of millions of people could be jeopardized. Too loose, and it's meaningless.
"They are both saying Medicare has to be on a budget," said economist Eugene Steuerle of the Urban Institute. "But each of them is also saying it has to be my type of system on a budget, and not your type of system."