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GOP budget plan would revamp Medicare, Medicaid

GOP budget plan would revamp Medicare, Medicaid

April 6th, 2011 in News

WASHINGTON (AP) - House Republicans set up a politically defining clash over the size and priorities of government Tuesday, unveiling a budget plan that calls for both unprecedented spending cuts and a fundamental restructuring of taxpayer-financed health care for the elderly and the poor.

The plan would slash federal spending by $5 trillion or more over the coming decade. It would leave Social Security untouched but shift more of the risk from rising medical costs from the government to future Medicare beneficiaries. It also calls for sharp cuts to Medicaid health care for the poor and disabled and to food aid for the poor.

Dubbed the "Path to Prosperity," the proposal by House Budget Committee Chairman Raul Ryan, R-Wis., also calls for dramatically overhauling the complicated and inefficient U.S. tax code. It would scrap numerous tax breaks and loopholes in exchange for reducing the top income tax rate for both individuals and corporations from 35 percent to 25 percent.

Democrats launched a furious counterassault on the health care proposals.

"They're ending Medicare as we know it. They take away the Medicare guarantee for seniors," said Rep. Chris Van Hollen, D-Md. "All the risk of increased costs will be borne by seniors."

Despite its huge cuts, Ryan's plan still can't claim a balanced budget by the end of the decade because of promises to not increase taxes or change Medicare benefits for people 55 and over. After six years, annual deficits are projected to fall to the $400 billion range, enough to stabilize the nation's finances and prevent a European-style debt crisis that could force far harsher steps, Ryan said.

Under the arcane congressional budget process, the GOP plan is not actual legislation. It does provide a theoretical basis for action, but with Democrats controlling the Senate, the GOP plan serves more to frame the debate heading into next year's election than represent a program with a chance of passing Congress and becoming law.

"For too long, Washington has not been honest with the American people. Washington has been making empty promises to Americans from a government that is going broke," Ryan said. "The debt is projected to grow to truly catastrophic levels in the near future, leading to an economic collapse and a diminished future."

The GOP plan would still add $5 trillion to the deficit over the coming decade, though it promises to reach so-called "primary balance" by 2015, meaning that the budget would be balanced save for interest payments on already accumulated debt. The national debt now exceeds $14 trillion and the White House projects this year's deficit at $1.6 trillion.

Democrats said the GOP plan focused its cuts on seniors and the poor to pay for continued tax cuts enjoyed by the wealthiest.

Ryan's plan would produce a $995 billion deficit next year, compared with the $1.1 trillion projected in President Barack Obama's budget proposal. Republicans moved quickly to advance it, scheduling committee action on Wednesday and a vote by the full House for next week.

The GOP plan stands in stark contrast to Obama's February budget, which attracted criticism for failing to address federal health care programs whose costs are far outpacing other inflation. Obama's budget ignored most of the most controversial recommendations of his deficit commission, such as raising the Social Security retirement age and curbing future benefit increases.

The GOP plan would fundamentally restructure the nation's biggest health programs in a bold stroke that could make Obama's insurance overhaul look like baby steps.

Obama's law expanded coverage to about 30 million people who don't have it now. Ryan's plan not only would repeal Obama's expansion completely, but it would recast Medicare and Medicaid, which currently help pay medical bills for some 100 million Americans.

People now 54 and younger wouldn't get to go into the same Medicare program as their parents and grandparents upon retirement. Instead, they would get a voucher-style federal payment to purchase coverage from a choice of regulated private plans.

Poor people would no longer have a right under federal law to get health care through Medicaid. Instead, Washington would send each state a lump sum to spend on medical care, nursing homes and other health services for the poor and disabled. In an economic downturn, a state hurting for cash might decide to stop accepting new applications for Medicaid.

At its most basic level, Ryan's plan would shift more of the risk for rising health care costs from federal taxpayers to individual beneficiaries, medical service providers and states, giving them all a powerful incentive to cut waste and improve quality. If the theory works, it could finally start to slow the unsustainable rate of rising health care costs.

"We're actually saving Medicare and Medicaid, making them solvent for future generations," Ryan said. "And, yes, we're cutting spending. We're cutting a lot of spending, because government is spending way beyond its means."