(Updates throughout new sourcing, details and background)
By David Morgan and Susan Cornwell
WASHINGTON, March 13 (Reuters) - A bipartisan deal in Congress to spare doctors from recurring Medicare pay cuts was in jeopardy on Thursday, as Republicans ignored protests from physicians and moved forward with legislation that would use the so-called "doc fix" to undermine Obamacare.
Hundreds of thousands of doctors who participate in traditional Medicare face a 24 percent pay cut on April 1, as part of a 1990s initiative to restrain federal spending on the government healthcare program, which today serves nearly 50 million elderly and disabled people.
Doctors thought they would see a permanent fix this year after Republicans and Democrats in the House of Representatives and Senate agreed on a policy to replace the payment formula, known as the sustainable growth rate or SGR, according to lobbyists, congressional aides and analysts.
But efforts to seal the deal broke down over how to fund its $138 billion cost over the next decade, and the doc fix appeared to be in danger of political oblivion as Republicans in the House and Senate pursued legislation that would pay for a solution with money from President Barack Obama's signature healthcare reform law.
The sudden partisan character of the doc fix debate brought an unusual public rebuke from the American Medical Association, one of the most powerful lobby groups, representing 225,000 physicians.
"I am writing to profess our profound disappointment that a strong bipartisan, bicameral effort to repeal the Medicare sustainable growth rate has become a victim of partisan approaches," Dr. James Madara, AMA's chief executive, said in a Thursday letter to House Speaker John Boehner and House Democratic leader Nancy Pelosi.
"We renew our call for all parties to engage in good faith, bipartisan efforts to address the budgetary implications of this bill and enact it. We stand ready to work with you in this endeavor."
Other physician groups also expressed their displeasure over the partisan turn.
"It's a sad state of affairs," said Dr. Thomas Barber, a lobbyist for the American Academy of Orthopedic Surgeons, which represents 16,000 physicians.
"To see something that was supported by both parties get shanghaied into the partisan politics of the day is very frustrating," he said.
Congressional aides described the Republican legislation as a signal that a months-long push for a permanent, bipartisan doc fix is unlikely as the political calendar moves toward the November election. Instead, they said doctors would probably see a temporary patch of nine months or more that would avoid the April 1 pay cut and postpone a permanent solution into the next Congress, which takes office in January 2015.
Lobbyists said that could mean starting the process over, especially if a Republican Senate victory in November creates a new political dynamic between Congress and the Obama White House.
Analysts said it also eliminates an opportunity to move traditional Medicare away from its costly fee-for-service structure. Republicans and Democrats agreed to replace the SGR with policies that call for Medicare doctors to accept new performance standards or participate in alternative care models designed to improve service while lowering costs in exchange for avoiding pay cuts.
House Republicans are poised for a Friday vote on a bill that would find the money by delaying the individual mandate penalty in President Barack Obama's healthcare law for five years, an action opposed by the White House and its Democratic allies in Congress.
The bill advanced on Thursday on a procedural vote, largely along party lines.
Meanwhile, Republican Senators Orrin Hatch and John Cornyn were joined by Senate Republican Leader Mitch McConnell on a bill that would repeal the individual mandate altogether to generate money for a permanent doc fix.
Lobbyists said the bipartisan momentum ended in the early weeks of 2014, after oversight committee chairmen from both congressional chambers struck a deal on policy language that they incorporated into legislation.
Behind-the-scenes efforts to reach a deal on money quickly ran aground, with Republicans demanding that the money come from entitlement reforms to Medicare and the Medicaid healthcare program for the poor, and Democrats pushing for hypothetical savings from the wars in Iraq and Afghanistan.
The AMA, which has led more than 600 other physician groups in a lobbying effort to secure a permanent doc fix, says it is still hoping for a permanent solution this year. Analysts say some doctor groups are pressing lawmakers to agree to a shorter patch of only a months to sustain the opportunity for dialogue.
The AMA says there have been 16 temporary SGR patches so far, costing taxpayers $154 billion. Securing an agreement on the doc fix is one of the association's highest priorities. (Editing by Mohammad Zargham and Steve Orlofsky)