BACKGROUND: Medicare, the federal program that provides health care to the elderly, has become a target for budget cutters. It is one of a group of major government benefit programs -- including Medicaid, Social Security, farm subsidies, as well as tax cuts -- which are grouped in a major "reconciliation bill." Like other entitlements programs, Medicare spending has spiraled out of control, and at its current rate of growth the government's Medicare trust fund threatens to go bankrupt in less than 10 years. Republicans, who want to balance the federal budget in seven years, are proposing to trim Medicare growth by $270 billion dollars over that period. The House Republican plan would raise the premiums of most recipients by $7 a month, and more for the affluent. It would also offer senior citizens a greater choice of medical plans, such as the incorporation of heath maintenance organizations (HMOs).

KEY PLAYERS: A plan, still being drafted by Sen. Judd Gregg, (R-NH) appears the most likely to receive wide support in the Senate. Rep. Bill Thomas, (R-CA) is the chief author of the House plan which has been introduced into the House Committee on Ways and Means. The committee will begin hearings this week. Rep. Bill Archer (R-TX), the chairman of the Ways and Means committee is another important figure. He's got the task of holding his committee's votes together.

PRO: The alternative to slowing the growth of Medicare spending is watching the program run out of money altogether. Republicans also need major savings to achieve a balanced federal budget by the year 2002. Republicans also hope to offer more choice to the 37 million elderly or disabled Americans who rely on the program.

"If we can design a brand new approach, a way of strengthening the system, or giving seniors choice, and if, as a result of that, seniors will be able to choose world-class care for $6,700 [in benefits], why would you want to spend more?" - House Speaker Newt Gingrich of Georgia

CON: President Clinton says he agrees that Medicare must be trimmed, but has proposed a cut of just $124 billion as part of his plan to reach a balanced budget over 10 years. He has threatened to veto the Republicans' Medicare plan, saying its severity is caused by an indefensible $245 billion tax cut planned by the GOP.

"This is a plan to take more from people on Medicare ... and put it into a tax cut, more than half of which would go to people who don't need it ... It would dismantle Medicare as we know it." - President Clinton

WHAT'S NEXT: The Senate is nearing a decision on a final welfare bill, and is completing a host of compromises and negotiations to bring moderate Democrats on board. The bill will then go to a House-Senate conference where several differences will have to be hashed out. (There is some chance that the vote will be postponed and included as part of a major "reconciliation" bill in October.)

INSIDE SCOOP: Gingrich and Senate Majority Leader Bob Dole of Kansas were concerned enough about party unity on the Medicare issue that they held a meeting to deliver a pep-talk to Congressional Republicans. They urged members to hold ranks against potentially intense political pressure from senior citizen's groups. Democrats hope to gain political mileage by juxtaposing the Republicans' Medicare cuts with their proposed tax break.