06/23/2011 05:02 pm ET | Updated Aug 23, 2011

Democrats Consider Offering Medicare Provider Cuts In Exchange For Revenue Increases

NEW YORK -- House Majority Leader Eric Cantor's (R-Va.) decision on Thursday to leave ongoing debt ceiling negotiations seemed to bring those talks to an abrupt standstill. But aides on the Hill and a statement from White House Press Secretary Jay Carney seem to suggest that Cantor's absence means, simply, that the discussions will now get picked up by President Barack Obama and Speaker John Boehner (R-Ohio).

As the heavier hitters get set to pick up the slack, the contours of a grand bargain are once again emerging, and it may not be to the liking of either party. In exchange for revenue-raisers (most likely in the form of siphoned off tax breaks or the closing of loopholes) Democrats will agree to Medicare cuts -- not on the beneficiary side, which would have produced deafening howls from within the caucus, but on the provider side.

The first hint of this deal came on Thursday morning, when Senate Finance Committee Chairman Max Baucus said the following with respect to the Cantor news:

I think we should stay at the table. I think we should keep working, difficult as it is, and try to balance between Medicare cuts -- additional Medicare cuts -- so long as there is commensurate additional revenue. We need balance here.

The notion that "additional Medicare cuts" would be exchanged for "commensurate" revenue increases piqued the interest of more than one Democratic operative, several of whom highlighted the quote in emails to The Huffington Post. Baucus has been one of the most steadfast backers of keeping Medicare out of the debt ceiling negotiations. For him to express newfound openness seemed suggestive about the party's thinking at large.

"No one has fought harder than Chairman Baucus against the House proposal to that would end Medicare as we know it and increase costs for seniors by thousands of dollars," a Senate Finance Committee aide emailed The Huffington Post. "Senator Baucus continues to fight for Medicare and made clear at the hearing that no changes in Medicare will be made unless Republicans agree to use revenue – in addition to spending reductions – to reduce the deficit, and any Medicare changes or savings would build on the type of efficiencies made in the Affordable Care Act, while protecting guaranteed benefits for seniors."

While such an explanation won't likely be enough to calm the nerves of inherently anxious progressives, the idea that lawmakers will build on the "efficiencies of the Affordable Care Act" is a notable tell. During the crafting of that legislation, Democrats had tried to lower the type of payments that Medicare makes to medical device manufacturers. They got fairly close to doing so, only to be told by now-former Sen. Evan Bayh (D-Ind.) that he would oppose the bill if it cut too deep. Desperate for 60 votes, it was an easy tradeoff to make. The language was dropped and Bayh, whose state houses many of those medical device manufacturers, became a yes vote.

Bayh is now gone from the Senate, and Democrats, eager to find some way to get Republicans to sign off on additional revenues, are now looking to trade in that chip. As one plugged in operative predicted: "There will be cuts on the provider side but not on the beneficiary side."

A second Senate source confirmed that cuts to Medicare providers were indeed being discussed as a tradeoff for revenue-raisers elsewhere. The source added that lawmakers would be looking beyond just medical device manufacturers, toward the hospital and prescription drug industries as well.

"We've been very careful distinguishing between cuts to Medicare beneficiaries and cuts to Medicare providers," the source said.

Whether this will work, practically or politically, remains unclear. Democratic voters will certainly be more open to protecting beneficiaries of Medicare at the cost of providers. But they also are wary that any cuts agreed to during the debt ceiling negotiations will dull the attacks that the party has been launching against the Medicare plan introduced by House Budget Committee Chair Paul Ryan (R-Wis.). Then there is the question of whether the revenue increases will match the medical device cuts in size.

"They will never go near the type of tax revenue that progressives want," said the plugged in operative. "And, of course, providers can always come back and try to get more money."