WRAPUP 1-"Gang of Six" provides hope for US debt talks

Armed with a new template, President Barack Obama and congressional leaders on Wednesday will try to see if an 11th-hour deal is still possible to avert a rapidly approaching default.

The ambitious new plan, unveiled by a group of senators known as the "Gang of Six," offers a ray of hope in

an increasingly grim standoff that has threatened the United States' top-notch credit rating.

As they study the details, congressional leaders will determine if the plan could point a way out of the impasse. A more modest proposal likely will be needed to avert the looming disaster but the Gang of Six plan could help lawmakers thrash out a broader budget deal in the coming months to address long-term fiscal problems.

Initial reaction was positive. Obama seized on the plan as a "very significant step" on Tuesday and urged congressional leaders to start discussing it. Senators from both parties embraced it while Republican leaders in the House of Representatives said it contained some good elements.

Investors welcomed the plan as well, driving up the price of 30-year Treasury bonds sharply and pushing U.S. stocks to their best day since March.

Obama and Republicans have been unable to forge an agreement that would raise the $14.3 trillion debt ceiling before the country runs out of money to cover all of its bills on Aug. 2.

Both sides agree that spending cuts should accompany a debt-limit increase to tame the rapidly mounting debt but have been unable to agree on the particulars. White House talks on a comprehensive deficit-reduction deal have stalled over tax increases, which Republicans oppose.

The Gang of Six plan includes many of the same politically risky remedies that have doomed other efforts but pairs them with incentives that could defuse opposition.

Republicans might object to the $1 trillion-plus in new tax revenue generated by closing an array of loopholes and breaks but they have welcomed the lower income tax rates that the plan also would provide.

Democratic distaste for the plan's $500 billion squeeze of Medicare and other health plans could be softened by assurances that their essential services would be maintained.

OBAMA'S HOPES

With less than two weeks until the Aug. 2 deadline, congressional aides say it is probably too late to use the Gang of Six as the basis for a debt-ceiling increase. But it could encourage a new round of discussions.

"My hope ... is that they tomorrow are prepared to start talking turkey and getting down to the hard business of crafting a plan," Obama told reporters on Tuesday.

It is not clear whether Obama would resume the high-profile White House meetings that ended inconclusively last week.

Democratic Senate Leader Harry Reid will speak with Obama on Wednesday, an aide said, but a meeting with all of the top leaders in Congress did not appear likely.

Obama's schedule remains relatively open, according to the White House.

Meanwhile, Congress is moving ahead with other debt-limit measures.

The Republican-controlled House passed a bill on Tuesday that would tie a debt-ceiling increase to passage of a balanced-budget amendment to the Constitution. That approach is expected to fizzle in the Democratic-controlled Senate.

In the Senate, leaders of both parties are crafting a complex compromise that would give Obama the authority -- and the blame -- for raising the debt ceiling.

Procedural hurdles could push a vote well into next week, meaning that final passage could come in the final days before Aug. 2.

Although that plan could avert a default, it is not likely to satisfy ratings agencies that are looking for a solution that would prevent the debt from growing out of control. Moody's Investors Service analyst said the Senate's compromise plan could result in a negative outlook on the U.S. credit rating, a sign of a possible downgrade in 12 to 18 months. 

Florida reforms health care for the poor to save money

Florida lawmakers passed a sweeping Medicaid reform package that places most recipients into managed care in a closely watched debate over how to curb costs and provide health benefits to the poor.

Following hours of debate and back-room negotiations over the past several weeks, the Republican-dominated Legislature late on Friday sent a package to Governor Rick Scott that backers say will save the state $1.1 billion next year.

Savings would be realized by shifting Medicaid from a traditional fee for service program to one that caps payments to providers and more closely mirrors private sector health insurance plans.

The bill would split the state into 11 regions and allow managed care companies to compete for business within those geographic boundaries.

Backers say the shift will reduce costs of health care for some 2.9 million recipients in the state's $22 billion federal program, without compromising care.

"This bill does what it should do. It treats our friends and neighbors who receive Medicaid with integrity, respect and we let them control their destiny," said Republican Sen. Joe Negron, a sponsor of the bill.

Like other states, Florida's Medicaid tab continues to gobble up a greater percentage of state spending and now accounts for nearly a third of the state's $69.7 billion budget.

While the federal government pays about 60 percent of benefits, the state's tab has also risen and backers fear the state's share of payment could go up if the federal match returns to historic levels.

The state has operated a pilot project in five counties with mixed results.

A review of the pilot program in 2009 found that it did not have a significant impact on the quality or access to care. Reviewers determined that changing the delivery system of Medicaid benefits was a policy decision that would significantly alter the level of care.

Critics say the reform measure was much improved during the legislative process but will still make it more expensive for low-income Medicaid recipients who will also face higher out of pocket expenses for emergency room care.

The reforms also will require some disabled recipients to navigate the managed care system.

"As we move forward with this statewide legislation, I hope the proponents will recognize these flaws and concerns," said Rep. Mia Jones, a Democratic opponent of the bill.