Obama: 'Ryan's plan would end Medicare'

By Diana Manos
12:22 PM

President Barack Obama on Wednesday outlined his plan for reducing the federal deficit and cutting Medicare costs. Unlike the GOP plan, his plan would "use a scalpel, not the machete," he said.

The speech comes as Congress is poised to vote Thursday on a FY2011 budget that would cut the federal budget by $40 billion over last year.

[Read Twitter recap: Highlights of Obama's speech.]

After settling the debate over this year's budget, leaders of both parties have said they are eager to move on to plans to reduce the deficit beyond 2011. Medicare will play a major part of that discussion.

In his speech, given at George Washington University, Obama countered the Republican plan for reducing Medicare and Medicaid spending, introduced last week by House Budget Chairman Rep. Paul Ryan (R-Wis.).

Ryan's plan for Medicare's future would end direct payment to healthcare providers from the federal government, instead providing health insurance vouchers to seniors. The vouchers would amount to about $15,000 annually, calling for seniors to pay more out of their own pockets.

Ryan's Medicaid proposal would replace the current federal matching of state funds with block grants.

Obama said Ryan's plan would "end Medicare as we know it," and defended Medicare and Medicaid programs as part of "what makes America great."

[Related: CBO: Ryan budget roadmap shifts healthcare burden to seniors, states.]

He recognized, however, that two-thirds of the federal budget is spent on Medicare, Medicaid, Social Security and national security, and that careful changes will need to be made to cut costs in these programs.

Obama's plan to reduce Medicare spending includes steps to cut fraud and abuse and a push for lower prescription drug prices.

For Medicaid reductions, Obama said the federal government should work with governors "to demand more efficiency and accountability" from the program.

Obama said the Affordable Care Act should cut Medicare spending by $500 billion by 2023 and an additional $1 trillion in the following decade through various health reform provisions.

He also called for tax increases for America's most wealthy.

Republicans criticized Obama's plan as being too vague and opposed the tax increases.

"Outside of Washington, it's obvious that the problem isn't that people are under-taxed, but that Washington overspends," said Sen. Charles Grassley (R-Iowa). "Washington needs to get behind policies that clamp down on spending and grow the economy. The answer is not defending ways to grow the government."