Budget rivals look to future of Medicare, Medicaid

As Capitol Hill negotiators fleshed out details of last week’s epic budget deal, Democrats and Republicans prepared for the next set of confrontations over federal spending, including the future of Medicare and Medicaid.

White House officials said President Obama would present his long-term debt-reduction strategy Wednesday in a speech that would include his insistence that the nation could not afford to preserve George W. Bush-era tax cuts for the wealthiest Americans.

And by the end of the week, House Republicans plan to vote on their 2012 budget blueprint, which would slash domestic spending, reduce income tax rates and start turning Medicare into a private program.

The $38-billion agreement that kept the government from shutting down at midnight Friday preserves Head Start preschool funds and the Pell Grant program for college students, the White House said Sunday night, but reduces housing assistance and other programs in the Labor, Education and Health and Human Services departments.

According to the White House website, Obama saved his signature education program, Race to the Top, but cut earmarked transportation projects and crop insurance rebate programs. The administration characterized cuts at the State Department and Foreign Operations as “significant.”

Congressional sources cautioned, however, that final details were in flux as negotiators searched line by line to reach the $38-billion reduction. The package covers the remainder of the 2011 fiscal year, which ends Sept. 30.

Now, the battle moves to 2012 and whether to raise the federal debt ceiling. The spending debate is expected to dominate Washington in the months ahead and spill into the presidential campaign, with competing outlooks on the appropriate role of the federal government.

“It’s going to be a tough fight — how are we going to reduce the deficit, get on a more sustainable fiscal trajectory but in a way that doesn’t compromise” economic progress, White House advisor David Plouffe said on NBC’s “Meet the Press” on Sunday.

Republicans have criticized the president for failing to present a comprehensive debt-reduction plan when he outlined his proposed 2012 budget this year.

A detailed blueprint from the GOP’s budget guru, Rep. Paul D. Ryan of Wisconsin, would drastically reorder the federal government. Aside from lowering the top tax rates for corporations and individuals to 25% from 35%, it would fundamentally shrink the federal role in the delivery of healthcare to the poor, disabled and future generations of seniors.

“We want to move from talking about saving billions of dollars to going on and saving trillions of dollars,” Ryan told “Meet the Press.”

Voters are focusing on the nation’s record deficits and debt, both of which grew during the economic downturn as tax revenue plummeted and Washington spent money to shore up the economy and help the jobless.

Now at nearly $14.3 trillion, the national debt will hit its legal limit in weeks, and Congress will be asked to grant the government additional borrowing authority.

The vote has been routine, if politically unpopular, in past years. Under President George W. Bush, Congress voted seven times to raise the debt limit.

If Congress fails to act, the economic fallout would be severe, analysts and business leaders warn. They predict that interest rates would increase, dramatically affecting mortgages, consumer purchases and business lending.

Republicans intend to try to extract new budget restraints from the White House in exchange for voting to raise the debt limit. They may fight for statutory spending caps or a balanced budget amendment to the Constitution.

“The president just can’t waltz in and say, ‘We’re going to have a debt crisis if you don’t raise the debt limit,’ ” Sen. Jeff Sessions of Alabama, the top Republican on the Budget Committee, told CBS’ “Face the Nation.”

Congress is set to vote this week on the package of $38 billion in budget cuts.

The series of stopgap spending measures included $12.5 billion to be cut from programs Obama had planned to terminate this year, as well as earmarked requests from lawmakers for home-state projects.

Of the remaining reductions, nearly $18 billion is expected to come from one-time cuts or accounts with unspent money — a strategy Democrats employed to save domestic programs from deep reductions that would be difficult to undo in future years.

Obama’s speech Wednesday is expected to discuss what many budget experts see as the deficit drivers — Medicare, the popular healthcare program for seniors, and Medicaid, which assists millions of the poor and disabled.

“You’re going to have to look at Medicare and Medicaid and see what kind of savings you can get,” Plouffe told “Meet the Press.”

Ryan’s 2012 budget proposed major changes to the longstanding federal programs.

For Medicare, seniors would receive a stipend to buy insurance on the private market. Analysts expect it would raise individual out-of-pocket health costs while making federal costs more stable and predictable.

For Medicaid, Republicans would shift control and cost for much of the program to states, giving governors greater say in how the services are run and which residents are eligible. In addition to the poor and disabled, many Medicaid recipients are low-income seniors.

Ryan’s budget also would make permanent the tax breaks extended last year in a compromise between Obama and Congress, rather than allow them to expire in two years.

The president wants to terminate the tax cuts for individuals earning more than $200,000 and families earning more than $250,000.

“The president’s goal, and he’s been clear about this, is to protect the middle class as we move forward here,” Plouffe said. “So people like him, as he’ll say, who have been very fortunate in life, have the ability to pay a little bit more.”

lisa.mascaro@latimes.com