In his speech on Wednesday, President Obama laid out his plan for deficit reduction, and last week, Congressional Republicans released their 2012 budget proposal. Both plans reduce federal expenditures on Medicare and Medicaid, but they take strikingly different approaches. What are the key takeaways for health advocates?

Takeaway #1: The president gets the big picture right on key health care issues. Before the president’s speech, we laid out three key issues health advocates should be listening for. Between his speech and accompanying documents, it’s clear that the president is in a resoundingly good place on all three issues:

1. The president explicitly rejected proposals to turn Medicare into a voucher program and to convert Medicaid into a block grant. These approaches, the backbones of the 2012 Congressional Republican budget, do nothing to tackle the underlying drivers of health care costs. Instead, they shift these costs onto those who can least afford them: seniors, people with disabilities, and low-income families.

2. The president also understands the harm imposed by federal spending caps. While this is less clear from his remarks, follow up with White House officials makes it clear that the administration understands that a global cap is just a back door to turning Medicaid into a block grant and Medicare into a voucher.

3. He articulated an alternative, far more rational approach to cost containment, which builds on foundation of the Affordable Care Act. The president identified key approaches to build on the cost-containment structure laid out in the ACA. For example, he suggests strengthening the mandate of an independent commission of doctors, nurses, medical experts and consumers, created by the ACA, to weed out wasteful spending in Medicare without reducing benefits or increasing seniors’ costs. He also proposes using Medicare’s purchasing power to negotiate lower prescription drug prices for America’s seniors. And he recommends changing the way we reimburse for health care services, moving us away from a system that pays providers for more services and towards one that pays providers for better health outcomes.

(For more on the ACA’s approach to cost containment and how it can be enhanced going forward, see our one page graphic and issue brief.)

Of course there are still many details of the president’s proposal to be filled in, and there are some concerns about specific elements such as the overall size of the proposed Medicaid cut and new limits on states’ ability to tax health care providers to fund Medicaid. But it’s also important to put the President’s proposal in context, which brings us to…

Takeaway #2: The president’s approach presents a stark contrast to the one endorsed by Congressional Republicans. This contrast is most obvious in two key areas:

1. Reducing costs vs. shifting costs. As we laid out above, the president’s approach looks to reduce health care costs primarily by tackling their underlying causes.

Congressional Republicans, on the other hand, treat rising health care expenditures like a game of “hot potato”: they merely toss these costs onto states, seniors, people with disabilities, health care providers, and other vulnerable families. First, they turn Medicaid into a block-grant program that, by design, would not keep up with rising health care costs. This would impose crippling burden on states, leading to rollbacks in health care coverage for millions of nursing home residents, people with disabilities and low-income children and families. It is no exaggeration to say that some would die as a result.

Second, they end Medicare as we know it and replace it with a voucher that seniors would use to buy coverage on the private market. These vouchers, like the block grants above, are designed not to keep up with rising health care costs, leaving seniors to pay an ever-increasing share of their health care costs. According to the nonpartisan Congressional Budget Office, under this plan the average senior would shoulder $6,000 more in annual out-of-pocket costs by 2022.

2. Bank accounts of millionaires vs. health security for seniors, people with disabilities and low-income children. Unlike President Obama, the Congressional Republicans would extend Bush-era tax cuts for the wealthiest Americans. Under this plan, the average person earning at least a million dollars a year would receive an average tax cut of $125,000 per year. Through severe cuts to Medicaid and Medicare outlined above, Congressional Republicans essentially force America’s most vulnerable citizens to finance these tax cuts for its wealthiest citizens.

These contrasting budget proposals offer us a clear choice: We can maintain and improve health security for American families, or we can have tax cuts for the wealthiest people and corporations. We can’t have both and still reduce the deficit. The American people have already indicated their policy preference—for example, three quarters think Medicaid funding should either be kept the same or increased, and 70 percent would prefer shielding the program from cuts to using it for deficit reduction.

The president is clearly listening. Is Congress?

— Katherine Howitt, Policy Analyst and Michael Miller, Policy Director