WASHINGTON — Next to “death panels,” the second-most toxic issue for seniors in the current health-care debate are concerns that Congress will pay to expand the ranks of the insured by cutting Medicare.

The White House and congressional reformers call it “savings” — a move to reward quality care, rather than quantity of services provided, more efficiency, and less waste.

The nonpartisan Congressional Budget Office estimates that the Senate Finance Committee’s proposed bill will generate $404 billion in savings from FY 2010-201, mainly through reductions in Medicare’s payment rates in the fee-for-service sector and reining in the popular Medicare Advantage program.

But there’s a catch: Congress has to muster the political will to enforce these cuts over time and lawmakers have shown little heart for it, especially when it means riling the powerful seniors lobby.

“During the whole health-care debate, Congress is really playing with fiscal dynamite,” says Robert Bixby, executive director of the Concord Coalition, a budget watchdog group. “I’m very concerned whether the savings from Medicare will materialize. Typically, Congress sets up a formula and if the formula turns out to give people money, it goes into effect. If it denies people money, Congress changes the formula.”

Exhibit A is Congress’s annual “Doc fix.” In 1997, Congress voted to establish a “sustainable growth rate” (SGR) for Medicare in a bid to rein in federal deficits. But the annual cuts in the growth of payments to doctors serving Medicare patients proved so unpopular that many physicians stopped accepting Medicare patients. Congress has come up with funds to “fix” the cuts every year since 2003.

Today, Senate majority leader Harry Reid launches a bid to end the SGR with a key procedural floor vote. The Senate Finance Committee’s version of health-care reform funds the “Doc Fix” only for 2010. The move prompted calls of foul from Republicans, who said it understated the true cost of the bill. The full 10-year cost would be $245 billion, more than wiping out CBO’s estimate of a $81 billion surplus for the Senate Finance bill.

The vote sets up a tough choice for moderate Democrats, especially coming just days after the US Treasury announced a record $1.4 trillion deficit for FY 2009. It also sets up a clash with House Democrats, who are committed to pay-as-you-go rules requiring offsets for new spending or tax cuts. But if successful, it moves $245 billion in costs off the table, as Democrats work out a plan to pay for health-care reform.

Meanwhile, Republicans are turning up the heat on the impact of Medicare cuts on seniors.

“At the outset of this debate, seniors had no idea they’d be asked to help foot the bill for this massive experiment in government health care through cuts to Medicare,” said Senate Republican leader Mitch McConnell in a floor speech on Thursday.

Proposed cuts in the Finance panel’s version of the bill include: $130 billion to Medicare Advantage, a supplemental plan that covers some 11 million seniors; $120 billion to hospitals that care for seniors; $40 billion to Home Health agencies; $15 billion to nursing homes; and $8
billion to hospice care.

Democrats respond that the existing Medicare system won’t work for seniors over the long run, because fewer and fewer doctors are willing to treat them.

Popular programs like Medicare Advantage provide additional benefits that aren’t available to seniors in rural areas, says Sen. Tom Harkin (D) of Iowa, who chairs the Senate Health, Education, Labor and Pensions Committee. “If people want to have those added little features, they can buy supplemental insurance to do that, but I don’t think it should be done through Medicare.”