GOP budget plan would revamp Medicare, Medicaid

Wednesday - 4/6/2011, 3:16am EDT

Associated Press

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 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 Paul 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."

A Congressional Budget Office analysis released late Tuesday also showed Ryan's budget would leave in place roughly $500 billion in Medicare cuts that were part of President Barack Obama's new health care law. Republicans blasted those cuts in their successful campaign to take back control of the House. A spokesman for Ryan said the savings would be plowed back into Medicare.

But the GOP budget would also repeal Obama's plan to gradually close the Medicare prescription drug coverage gap, known as the "doughnut hole."

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.

"Everyone agrees we must cut spending and tighten our belt, but House Republicans have chosen to do so on the backs of America's seniors, not the oil companies making record profits and getting tens of billions in taxpayer subsidies," said Rep. Steve Israel, D-N.Y. "Forcing seniors to pay higher health costs is not the right way to balance our books and it's not the only way to do it."

Ryan's plan would produce a $995 billion deficit next year, compared with the $1.1 trillion projected in 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, but it would recast Medicare and Medicaid, which currently help pay medical bills for some 100 million Americans.