Medicaid, Medicare Targeted in Rep. Paul Ryan's 2012 Bold Budget Overhaul


"Block grants are a possibility but you have to be very careful that you don't allow states to back away from the responsibilities to low income people," she said. "You can't possibly get as great savings as Ryan thinks."

Medicare and Medicaid Key to Republican Budget Cuts

The non-partisan Congressional Budget Office said in a report today that under the proposal, the federal budget would show a deficit of about 2 percent of the GDP in 2022, a slight surplus in 2040 and a surplus of roughly 4 percent in 2050.

The proposal would reduce federal spending on Medicare, Medicaid and Children's Medicaid program to 5.5 percent of GDP in 2022.

"Much less uncertainty about future federal spending on Medicare and Medicaid would exist under the proposal than exists under current law," the report said.

Obama has acknowledged multiple times that the nation needs to tackle entitlement reforms, but his budget proposal released in February did little to address them. At the time, he said he was taking a "scalpel," not a "machete" to the budget to avoid too much pain.

Entitlement programs, though increasingly burdensome to the federal government, are coveted by Americans and any major cuts are unlikely to garner widespread support.

A Kaiser Family Foundation poll conducted in early January found that 47 percent of Americans did not want to see a reduction in Medicaid, while 56 percent felt that way about Medicare. An even greater number -- 64 percent -- did not support a change in Social Security.

About 60 million Americans rely on Medicaid and about 48 million seniors depend on Medicare for their health coverage.

Ryan's plan, which is likely to become a roadmap for Republicans, will be both socially and politically caustic, as the congressman has himself acknowledged.

"The Ryan plan writ large is switching the risk from government to taxpayer with both Medicare and Medicaid," said Ron Haskins, former White House and congressional advisor on welfare issues and currently the co-director of the Center on Children and Families at the Brookings Institute. "You're into a system now where the market is really playing a major role and the incentives have changed a lot. But the bottom line is that people are under greater risk than they were were under the Medicaid program."

"I think the guy is amazingly brave. It truly is one of the most decisive turning points in the financial history of the federal government, and it could explode. This could hurt Republicans," Haskins said.

Other proposals in Ryan's plan include:

Decrease in defense spending.

$30 billion reduction in farm subsidies over 10 years.

Federal worker pay freeze until 2015.

Federal workforce reduced, through attrition, by 10 percent by 2014.

Privatization of Fannie Mae and Freddie Mac.

Cap all non-security discretionary spending at 2008 levels.

Permanently extend all Bush-era tax cuts.

Reduces the corporate tax rate from 35 percent to 25 percent.

ABC News' Jonathan Karl contributed to this report.

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