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Ryan seeks major budget overhaul

Medicaid becomes block grants, Medicare changes to defined contribution plan

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April 05, 2011 | comments

By Craig Gilbert of the Journal Sentinel

House budget chairman Paul Ryan said Monday that his GOP budget is an effort to "pre-empt a debt crisis" and "fix the problem before it gets out of control."

"We think the country is ready for an honest conversation. We think Americans want to be talked to like adults, not like children, and we think they're ready for a fact-based budget without the spending gimmicks and the usual empty promises," Ryan said in an interview Monday.

Ryan's budget, a wholesale overhaul of government spending, tax and entitlement programs, will be unveiled Tuesday morning. It is already sparking a furious partisan debate over the size and role of government.

Much like his "Roadmap" - the controversial fiscal blueprint Ryan has promoted in recent years - the new budget seeks huge long-term savings by restructuring the government's big and expensive health care entitlements for older and poorer Americans, Medicare and Medicaid. It also calls for the repeal of the health care law adopted under President Barack Obama. The plan reportedly does not specify major changes to Social Security.

Medicaid would turn into a block grant to states, which would have far more leeway to decide how to spend the money they get from the federal government.

And Medicare, while unchanged for people now 55 and older, would no longer exist in its current form for people now under the age of 55. It would go from being a defined and guaranteed benefit to being a defined contribution from the government toward an individual's premiums.

Dual reductions
When the Congressional Budget Office analyzed a similar plan Ryan offered with former federal budget director Alice Rivlin, it concluded that "recipients would probably have to purchase less extensive coverage or pay higher premiums than they would under current law."

In other words, Medicare benefits would be effectively reduced compared with what recipients now get - and federal spending per capita on Medicare would be reduced as well. That would account for the savings Ryan seeks.

Ryan argued Monday that benefits in his plan shouldn't be compared with the status quo because the benefits that Medicare now promises are unaffordable in the long run.

"Medicare itself is growing at such an unsustainable path that it crowds out all other spending in the federal budget," Ryan said.

Ryan said Medicare spending will continue to grow as a share of the economy in his budget, but at a significantly lower rate than it is currently projected to grow.

Because people retiring in the next 10 years would be exempt from the changes, Ryan's proposed Medicare savings don't begin to materialize until a decade from now.

But his budget seeks its savings over the next 10 years from a sweeping array of individual spending cuts, changes to current programs, and overall caps on government spending.

Ryan said Sunday on Fox News his plan would cut at least $4 trillion in spending over the next decade.

The budget also contains substantial changes in the tax system, either in the form of lower tax rates or tax reforms. Ryan has repeatedly voiced his opposition to using tax increases as a way to help balance the budget.

Democrats attack plan
Ryan held off on releasing most of the substance of his budget until Tuesday.

But Democrats reacted to the early details by accusing Ryan of crafting a budget in which the real pain is borne by middle-class and low-income Americans.

"To govern is to choose, and it is not courageous to protect tax breaks for millionaires, oil companies, and other big money special interests while slashing our investment in education, ending the current health care guarantees for seniors on Medicare, and denying health care coverage to tens of millions of Americans," said the top Democrat on Ryan's budget committee, Maryland's Chris Van Hollen.

While Ryan's previous "Roadmap," with its big changes to politically popular programs, had attracted little support from fellow House Republicans, the budget he unveils Tuesday reflects a different political dynamic within the GOP caucus, which has grown more conservative and aggressive about cutting federal spending. Ryan has suggested in the past he would not propose a budget with major entitlement changes without achieving a consensus within his own caucus.

The debate over Ryan's 10-year budget begins this week while the two parties are still trying to come to a separate agreement on spending for the current fiscal year against the threat of a government shutdown.


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