Sept. 24 (Bloomberg) -- Senate Finance Committee members clashed over Medicare cost-cutting plans, with Democrats winning the first skirmishes yesterday over how to curb spending in the federal program for the elderly.

On the panel’s second day of debate over legislation to remake the U.S. health-care system, Republicans assailed a provision to create an advisory body empowered to propose Medicare cuts, part of a broader assault on the bill. Democrats said spiraling costs and looming Medicare insolvency call for tough decisions.

“We have to learn how to discipline ourselves,” said Senator Jay Rockefeller, a West Virginia Democrat, as he argued against an amendment that would have killed the commission.

The amendment, which failed, was one of 564 filed to modify the $856 billion proposal that committee Chairman Max Baucus released last week. The finance panel is the last of five committees to produce legislation that would expand coverage for tens of millions of Americans and rein in health- care costs, President Barack Obama’s top domestic priority.

Baucus, a Montana Democrat, has faced criticism from Democrats for wooing Republicans, most of whom have responded to his efforts by attacking the proposal. Senator Olympia Snowe of Maine, the Republican most likely to support the measure, says she wants to amend the plan to make insurance more affordable for Americans.

Orszag Praise

The Obama administration’s budget chief, Peter Orszag, praised Baucus’s plan in an interview, saying it “significantly expands coverage while doing so in a way that is not only deficit-neutral” but “deficit-reducing,” citing a review last week by the Congressional Budget Office.

Finance committee members, 13 Democrats and 10 Republicans, have been debating amendments to alter the bill. The changes would add to the proposal’s cost, though Baucus said its cost would still fall under $900 billion over 10 years.

The committee yesterday accepted an amendment by Senator Charles Schumer, a New York Democrat, that would encourage the use of biosimilar drugs, which are copies of expensive drugs made from living organisms. The amendment would reward physicians or hospitals who dispense biosimilar drugs sold through Medicare, reimbursing them at the average sales price of the biosimilar product plus 6 percent of the price of the original brand drug as a bonus.

The panel also approved a provision suggested by Senator Thomas Carper, a Delaware Democrat, to encourage states to return the federal share of any Medicare overpayment.

‘There’s a Goldmine’

“There’s a goldmine to be found there in going after fraudulent, incorrect and other forms of payments in which the taxpayers of the United States are being cheated,” said Senator Kent Conrad, a North Dakota Democrat.

Baucus rejected two Republican amendments to limit medical liability suits, saying they didn’t fall under the committee’s jurisdiction. He signaled interest in acting on medical malpractice changes, however, echoing Obama’s Sept. 9 pledge in a speech to Congress that he would explore a way to curb lawsuit-driven medical costs.

“We need to act in this area,” Baucus said. He said some surveys indicated that physicians’ use of “defensive medicine,” in which they order costly tests and procedures to avoid a lawsuit for neglecting something, drives up costs by as much as 12 percent.

Clash Over Commission

The most heated exchange yesterday was prompted by the amendment proposed by Senator John Cornyn, a Texas Republican, to strike the 15-member, independent Medicare Commission created by Baucus’s bill.

The commission would recommend ways Congress could reduce excess cost growth in Medicare and improve care. In years when costs were projected to be unsustainable, the body’s proposals would take effect unless Congress passed an alternate measure.

“Outcomes, that is the future, Senator Cornyn,” said Rockefeller. “Who is performing and who isn’t. I know the idea is right and I know the idea is the way to improve health-care in this country in a fair way.”

Cornyn criticized the commission’s potential reach, yet said it wouldn’t even go into effect for four years.

“Rather than making tough decisions about how to pay for new spending now, this proposal would delegate the commission broad spending-reduction powers beginning in 2013,” he said.

The Obama administration has been pushing back against Republican claims that Medicare recipients would see their benefits cut. Vice President Joe Biden, trying to shore up support among older Americans for a health-care overhaul, urged them to ignore “distortions” and “misrepresentations” that he said were being spread by opponents.

Not Touching Benefits

“Nobody is going to mess with your benefits,” Biden told more than 200 people yesterday at a town-hall meeting at a Leisure World retirement facility in suburban Maryland. He said much of the criticism aimed at the Democrats echoes Republican voices that once denounced efforts to create Medicare.

Baucus’s plan sidestepped one potential Republican assault, calling for nonprofit cooperatives rather than a federally backed insurance plan to compete against private insurers such as Hartford, Connecticut-based Aetna Inc. The government program, or “public option,” is favored by many Democrats as the best way to tamp down costs.

To appease Democrats, Baucus revised his proposal this week, scaling back a tax on high-end insurance plans, a labor union priority. He also expanded government subsidies to help Americans fulfill his proposal’s mandate to buy insurance.

To contact the reporters on this story: Nicole Gaouette in Washington at ngaouette@bloomberg.net

Last Updated: September 24, 2009 00:25 EDT