Efforts to Curb Social Spending Face Resistance

WASHINGTON — President Obama's re-election and Democratic gains in Congress were supposed to make it easier for the party to strike a deal with Republicans to resolve the year-end fiscal crisis by providing new leverage. But they could also make it harder as empowered Democrats, including some elected on liberal platforms, resist significant changes in entitlement programs like Social Security and Medicare.

Efforts to Curb Social Spending Face Resistance
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As Congress returned Monday, the debate over those programs, which many Democrats see as the core of the party's identity, was shaping up as the Democratic version of the higher-profile struggle among Republicans over taxes.

In failed deficit reduction talks last year, Mr. Obama signaled a willingness to consider substantial changes in the social safety net, including a gradual increase in the eligibility age for Medicare and limits in the growth rate of future Social Security benefits. An urgent question hanging over the new round of deficit talks is which of those changes Mr. Obama and Congressional Democrats would accept today.

While a potential change in calculating Social Security increases was part of the talks with Speaker John A. Boehner last year, the White House press secretary, Jay Carney, made clear on Monday that the administration was not considering changes to the retirement program as part of the deficit talks.

"We should address the drivers of the deficit, and Social Security is not currently a driver of the deficit," Mr. Carney said.

  • What Is the Fiscal Cliff?
  • Complete Coverage of the Fiscal Cliff
  • Republicans insist that changes in the major entitlement programs be on the table in exchange for their willingness to accept increases in tax revenue. But Democrats have given no indication that they are willing to consider policy changes or savings of the magnitude demanded by Republicans. The underlying dispute highlights a reason the politics of the deficit are so thorny: even as many voters say they want Washington to reduce the budget deficit, they oppose many of the benefit cuts and tax increases that could help achieve that goal.

    As the negotiations enter a crucial phase, influential outside advocacy groups like AARP and the National Committee to Preserve Social Security and Medicare are weighing in, alerting their members to possible changes in the popular programs.

    In the current negotiations with Congress over deficits and the debt, Mr. Obama said he would take a serious look at how to "reform our entitlements" because "health care costs continue to be the biggest driver of our deficits." Unless Mr. Obama and Congress reach some agreement, tax increases and budget reductions will take effect automatically on Jan. 1.

    Mr. Obama's room for maneuvering is limited by several political factors. In the presidential campaign, for example, he attacked cost-cutting proposals by his Republican opponents and won support from millions of voters by promising to defend Medicare.

    Moreover, since the Supreme Court upheld the new health care law in June, Mr. Obama has become skittish about cutbacks in Medicaid, the federal-state program for low-income people. The court said the expansion of Medicaid was an option for states but not a requirement. Cutting federal Medicaid payments to states could reduce the federal budget deficit, but could also cripple Mr. Obama's efforts to persuade governors to expand the program, the foundation of his health care overhaul.

    (Read More: Obamacare's Insurance Rule Is Upheld by Supreme Court.)

    Even if Mr. Obama and Republican leaders in Congress could agree on savings in Medicare and Medicaid, the president would face resistance from some liberal members of his party who oppose cuts in the two giant health care entitlement programs. Medicare and Medicaid insure one-third of all Americans, account for more than one-fifth of the federal budget and are expected to grow much faster than the economy in the coming decade.

    Two staunch liberals, Senators Tom Harkin of Iowa and John D. Rockefeller IV of West Virginia, said in a letter to Mr. Obama that he should "reject changes to Medicare, Medicaid and Social Security that would cut benefits, shift costs to states, alter the structure of these critical programs, or force vulnerable populations to bear the burden of deficit reduction."

    More than 40 House members, led by the Congressional Progressive Caucus, declare in a resolution that any deal on taxes and spending "should not cut Medicare, Medicaid or Social Security benefits."

    Republicans say the revenue to be gained from Mr. Obama's tax proposals would be dwarfed by the growing costs of the benefit programs.

    "You can't raise taxes enough to solve the problem," said the Senate Republican leader, Mitch McConnell of Kentucky. "Additional revenue should be tied to the only thing that will save the country in the long run, and that is reforming entitlements."

    Mr. Boehner said the newest entitlement — insurance subsidies for more than 20 million people under the health care law — should be "on the table" in negotiations. White House officials said the law should be given a chance to work before its budget is cut.

    In talks with Congressional leaders, Mr. Obama is seeking $1.6 trillion in additional revenue over 10 years and $340 billion in health care savings. If he hopes to get a deal, lawmakers say, the additional revenue will have to come down and the health care savings may have to go up.

    Mr. Obama and some Democrats in Congress say they are willing to squeeze savings from Medicare by trimming payments to drug companies, hospitals and other health care providers. They have generally ruled out structural changes that would increase costs for a typical beneficiary.

    In the presidential campaign, Mitt Romney said Medicare should provide "less support" to wealthier beneficiaries, and that is an idea on which Mr. Obama and Congressional Republicans could perhaps agree.

    (Read More: Romney Medicare Plan Draws a Stark Contrast.)

    Individuals with incomes over $85,000 a year ($170,000 for couples) already pay higher premiums for Medicare coverage of doctors' services. For beneficiaries with incomes over $214,000 ($428,000 for couples), the monthly premium is more than $300 per person, about three times the standard premium.

    Mr. Obama wants to increase premiums for high-income people and increase the number of beneficiaries who must pay higher premiums based on income.

    Congress should "reduce the federal subsidy of Medicare costs for those beneficiaries who can most afford it," the president said this year. House Republicans voted for a similar proposal last year.

    Max Richtman, the president of the National Committee to Preserve Social Security and Medicare, which represents beneficiaries, said this idea had been "pushed as far as it should be pushed." Saddled with more and more costs, he said, high-income beneficiaries may eventually want to leave the program.

    "If Medicare turns from an earned benefit into a welfare program," Mr. Richtman said, "you will see support dissipate."

    Mr. Obama also wants to impose a surcharge on Medicare premiums for older Americans who buy the most generous private insurance to supplement Medicare. The White House and some economists say such Medigap insurance encourages the overuse of medical care because beneficiaries are shielded from most co-payments and other costs. But many beneficiaries are willing to pay for the extra protection, and major insurers derive substantial revenue from the product.

    The politics of Medicaid are different.

    As part of a deficit reduction plan unveiled in April 2011, when he delivered an address on fiscal policy at George Washington University, Mr. Obama proposed "Medicaid savings of at least $100 billion over 10 years."

    Liberal Democrats and health care providers expressed dismay, saying the changes would hurt children, older Americans, poor people and those with disabilities. Mr. Obama scaled back the proposals. In his budget in February, he proposed legislative changes that would save Medicaid $55 billion over 10 years, mainly by reducing federal payments to states.

    In the wake of the Supreme Court decision, Mr. Obama is coming under pressure from his allies to drop these proposals.