Sens. Joseph Lieberman (I-Conn.) and Tom Coburn, MD (R-Okla.) released a Medicare proposal Tuesday that would stave off reimbursement cuts for physicians in the program for three years, but would raise Medicare eligibility to 67 and increase out-of-pocket expenditures.

"We can't balance our budget without dealing with mandatory spending programs like Medicare," Sen. Lieberman said in a statement. "We can't save Medicare as we know it. We can only save Medicare if we change it."

"Our plan recognizes that continuing Medicare as it is currently structured is a financial impossibility," said Sen. Coburn in the statement. "Our plan will preserve Medicare for current and future enrollees by taking important steps to realign the program with its original intent."

Based on past Congressional Budget Office (CBO) estimates, Lieberman and Coburn claim their bill will save Medicare $600 billion over 10 years, mainly shifting costs to beneficiaries and upping the Medicare eligibility age to 67 for persons born in 1949 or later.

For physicians, the bill offers a carrot in the form of a three-year "fix" for the sustainable growth rate (SGR) formula that determines physician reimbursement. That formula, which ties physician payment rates to changes in the gross domestic product, currently calls for a 30% cut in rates beginning Jan. 1, 2012.

Under the Lieberman/Coburn proposal, the fix would allow time for a new reimbursement system to be developed. The CBO estimates that extending the SGR for three years would cost $37.7 billion, the senators noted.

Other parts of the proposal include:

Streamlined deductibles. The proposal would combine the deductibles for Medicare Part A (hospital care) and Part B (physician care) into a single annual deductible of $550. "Streamlining the deductibles will make it easier for seniors to navigate Medicare while also directly addressing overutilization," according to the proposal.

The proposal would combine the deductibles for Medicare Part A (hospital care) and Part B (physician care) into a single annual deductible of $550. "Streamlining the deductibles will make it easier for seniors to navigate Medicare while also directly addressing overutilization," according to the proposal. Out-of-pocket maximum. The proposal would also add an annual "out-of-pocket maximum" of $7,500 "so that each Medicare recipient would now have a cap on annual medical costs to protect them from financial hardship or bankruptcy in the event of a major illness," the proposal noted. "Medicare enrollees do not have this protection now." However, higher-income beneficiaries would be subject to higher out-of-pocket maximums under the plan -- up to $22,500 depending on their income.

The proposal would also add an annual "out-of-pocket maximum" of $7,500 "so that each Medicare recipient would now have a cap on annual medical costs to protect them from financial hardship or bankruptcy in the event of a major illness," the proposal noted. "Medicare enrollees do not have this protection now." However, higher-income beneficiaries would be subject to higher out-of-pocket maximums under the plan -- up to $22,500 depending on their income. Higher Part D premiums. Currently, premiums for the Medicare Part D prescription drug program only cover about 11% of the program's costs, with the rest paid for from federal funds. The proposal would require beneficiaries who are making more than $150,000 annually ($300,000 for couples) to pay the full premium costs for their Medicare Part D drug coverage. Estimated savings for this provision: $5 billion to $10 billion over 10 years.

Currently, premiums for the Medicare Part D prescription drug program only cover about 11% of the program's costs, with the rest paid for from federal funds. The proposal would require beneficiaries who are making more than $150,000 annually ($300,000 for couples) to pay the full premium costs for their Medicare Part D drug coverage. Estimated savings for this provision: $5 billion to $10 billion over 10 years. Limited Medigap coverage. The senators noted that beneficiaries with Medigap insurance to cover the costs that Medicare doesn't cover use up to 25% more services than those without Medigap, even though the added services don't necessarily lead to better outcomes. To discourage this added utilization -- which increases the cost of the Medicare program -- the proposal would bar Medigap policies from paying any of the first $550 of an enrollee's cost-sharing liabilities and would limit coverage to half of the remaining coinsurance up to the newly created $7,500 out-of-pocket limit, saving the program $130 billion over 10 years, according to CBO estimates.

In addition to those provisions, the bill would phase out Medicare payments for bad hospital debt and require higher-income beneficiaries to pay the full premium for Medicare Part B.

House Democratic Leader Nancy Pelosi (D-Calif.) expressed displeasure with the proposal. "It is unfair to ask seniors to get less in benefits and wait longer to get onto Medicare – all while Republicans back tax breaks for Big Oil and corporations that ship American jobs overseas," Pelosi said in a statement. "Just like the Republican plan to end Medicare, this proposal is unacceptable, especially for struggling middle-class Americans."