By David Morgan
WASHINGTON (Reuters) - Republican lawmaker Paul Ryan, who caused an uproar this year by proposing a plan to privatize Medicare, unveiled a new bipartisan approach on Thursday for cutting the cost of the government's $525 billion healthcare plan for the elderly.
The chairman of the House of Representatives Budget Committee joined Democratic Senator Ron Wyden of Oregon to unveil a plan that would retain Medicare's popular fee-for-service program but subject it to direct competition from private insurance plans.
Beginning in 2022, the Wyden-Ryan plan would provide financial support allowing seniors to opt for insurance plans sold through a new, regulated Medicare exchange intended to foster competition and reduce costs.
Analysts said the move amounted to a political ploy calculated to bolster the prominence of Medicare reform as a 2012 campaign issue and to lay the groundwork for possible bipartisan legislation in 2013.
"This is about trying to get out in front of this issue before it's just another high-decibel shouting match," Wyden said in an interview with Reuters.
"We're outlining a bipartisan approach that would give us a chance to have what might be characterized as an adult conversation about Medicare," added the senator, who said there are no current plans to offer legislation anytime soon.
Medicare, the second largest U.S. social insurance program after Social Security, serves 48 million beneficiaries.
Escalating healthcare costs and a swelling senior citizen population are expected to deplete the system's trust fund in 2024, posing a huge fiscal risk to a federal government already reeling from annual billion-dollar deficits.
Ryan faced fierce criticism from senior citizen groups early in 2011 with his initial plan to convert the entire Medicare program into a "premium support" system to help senior citizens buy private insurance.
Republican presidential candidate Newt Gingrich initially castigated the proposal as right-wing social engineering. Analysts said it undercut support for Republicans among senior citizens, a critical base of voters who had helped the party take control of the House from Democrats in 2010.
Signs of bipartisan support for a premium support plan that retained traditional Medicare emerged early in the fall, during the failed deficit-reduction deliberations of a congressional super committee. But winning over either party to a specific plan is far from guaranteed.
On Thursday, White House spokesman Jay Carney said President Barack Obama was interested in ways to fix Medicare that do not require "radical privatization or ending of the healthcare plan for seniors."
Republican reaction was mute. But analysts said the proposal could help Republican House candidates in 2012 by shifting political attention away from Ryan's earlier plan.
Senior citizens can already opt for private insurance coverage from insurers like UnitedHealth Group and Humana Inc through Medicare Advantage. The government-sponsored plans serve about 25 percent of Medicare beneficiaries.
Wyden believes that competition would drive private insurance costs lower than beneficiaries currently receive from Medicare Advantage.
Healthcare lobbyists who have been pushing for more Medicare privatization welcome the proposal, saying insurance competition should follow the model set by Medicare's Part D prescription drug program.
"This will be the year of educating people and laying the groundwork and developing proposals. After the election is when we'll see serious action," said Mary Grealy, president of the Healthcare Leadership Council, which represents healthcare company chief executives.
(Additional reporting by Caren Bohan; Editing by Michele Gershberg and Jackie Frank)