House Republican budget plan would revamp Medicare

Reporting from Washington—
Pressing their differences with President Obama, House Republicans
will propose a 2012 federal budget Tuesday that includes an overhaul
of Medicare and Medicaid and would aim to chop at least $4 trillion
from the federal deficit over the next decade.

House Budget Committee Chairman Paul Ryan's broad overview of the
plan, which he described Sunday, is the clearest picture yet of how
the party plans to reduce government spending over the long term. It
also telegraphs the central role the issue will play in the GOP's
pitch to voters come 2012.

The combination of changes to entitlement programs and spending cuts
sketched out by the Wisconsin Republican amounts to a dramatically
different approach to deficit and debt reduction. But it also puts the
party in politically dangerous waters. Much entitlement spending —
including Medicare — benefits the middle class, making dramatic
changes controversial and politically risky. Still, experts note it is
all but impossible to take a major bite out of the national debt
without addressing the rising costs of the program, along with other
entitlements benefits. Ryan did not mention the most contentious piece
of the puzzle: Social Security.

"We are giving [Democrats] a political weapon against us, but look,
they're going to have to lie and demagogue," Ryan said on "Fox New
Sunday." "Shame on them if they do that."

In February, Obama proposed a budget that aimed to cut $1.1 trillion
from the deficit over 10 years by increasing tax revenues and making
targeted budget cuts. He did not suggest structural changes to
Medicare, Medicaid or Social Security.

Republicans blasted that plan as ignoring the primary reasons for
escalating debt and deficits, as well as many of the key solutions
proposed by a bipartisan commission that Obama asked to draft a
reduction plan.

The GOP budget plan would attempt to make changes to mandatory
spending programs as recommended by the commission — although not the
specific changes endorsed by the panel.

Ryan described the proposal as dependent largely on spending cuts and
entitlement changes rather than increased revenue. Republicans are not
expected to eliminate tax cuts for the wealthiest Americans that were
enacted during the George W. Bush administration and extended under
Obama in the waning days of the last Congress.

The GOP is making its proposal as House Republicans battle the
Democratic-led Senate over federal spending levels. Having failed to
pass a 2011 budget while Democrats controlled both chambers, lawmakers
are locked in a fight over how to fund the government for the current
fiscal year. In February, the House passed a measure with $61 billion
in cuts, which failed in the Democratic-controlled Senate.

Federal budget authority is due to expire Friday, leaving the threat
of a government shutdown looming over discussions.

Negotiations continued on Sunday, Senate Majority Leader Harry Reid
(D-Nev.) said on CBS' "Face the Nation." Reid nearly taunted House
Speaker John A. Boehner, saying the Ohio Republican was resisting
compromise with Democrats because he was afraid of crossing
conservative "tea party" activists.

GOP leaders must decide "whether they're going to do the right thing
for the country or the right thing for the tea party," Reid said.

A spokesman for Boehner did not respond to a request for comment. The
speaker has said he's trying to get the largest possible amount of
spending cuts.

Ryan acknowledged that the Republican plan was landing in a bitter and
divided political environment. The current spending fight involves a
tussle over peanuts — tens of billions of dollars — compared with the
reductions outlined in the GOP budget plan.

"Whether it's dead on arrival, I don't know, but where the president
has failed to lead, we're going to fix this problem," he said.

Under the proposed rework of the Medicare program, seniors would chose
from several federally subsidized health plans. The changes would take
effect in 2021 and would not affect people who are 55 or older now,
Ryan said.

The plan would distribute funding to states for Medicaid, the program
that provides healthcare to the poor and disabled, by block grants
rather than by formula.

Ryan declined to offer exact estimates on the proposal's effect on the
deficit, but he said the plan would go further than the commission's
recommendations, which proposed nearly $4 trillion in reductions
through 2020.

"We believe in exceeding the goals put out by the president's debt
commission," he said.The commission's plan encountered opposition from
members of both parties. Some Democrats said it cut too much, while
some Republicans, including Ryan, refused to sign on to its call to
increase government revenues.

Ryan said Sunday that the House GOP plan would call for lower tax
rates and a broader base, but he would not say whether that meant it
would advocate closing specific corporate loopholes.

"We don't have a tax problem," he said. "The problem with the deficit
is not because Americans are taxed too little. The problem with our
deficit is that Washington spends too much money."

The response prompted swift criticism from Democrats.

"It is now clear that the Republican budget is not bold, but the same
old ideological agenda that extends tax breaks to millionaires and big
oil companies while cutting our kids' education and health security
for seniors," said Rep Chris Van Hollen, (D-Md.), ranking member of
the House Budget Committee. "As the bipartisan fiscal commission has
shown, any responsible effort requires a balanced approach that
addresses both spending and revenue."

Ryan described the Medicare plan as a version of a "premium support"
system he crafted along with former Clinton administration budget
director Alice Rivlin. He acknowledged the proposal would shift more
of the burden for healthcare costs to seniors, saying the wealthiest
seniors would bear the largest portion.

"More for the poor, more for people who are sick, and we don't give as
much to the people who are wealthy," Ryan said. "This saves Medicare."

On Medicaid, the House GOP proposal would shift more control — and
flexibility, advocates argue — to the states by distributing funds in
block grants, Ryan said. Critics say the result would be a reduction
in support for the neediest.

Ryan rebutted that notion.

"Medicare and Medicaid spending will go up every single year under our
budget," he said. "They don't go up as much as they're going right now
because they're growing at unsustainable rates."

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