Wisconsin would cut Medicaid spending by $500 million over the next two years, with much of the savings coming from Family Care, under Gov. Scott Walker's budget released Tuesday.

But state Medicaid spending still would go up overall because the state must pay $1.3 billion over the two years to replace federal stimulus money that has been supporting the program. That money ends this year.

The moves would fill the state's $1.8 billion Medicaid gap, half of its $3.6 billion budget shortfall.

Medicaid, the state-federal health plan for the poor, includes BadgerCare Plus, Family Care, SeniorCare and other services. It covers 1.2 million people in Wisconsin, or one in five residents. Enrollment has swelled in recent years as eligibility expanded and the recession led more people to sign up.

Walker called the program "an unsustainable budget challenge" and proposed $500 million in cuts.

About $110 million would come from Family Care, which provides long-term care for people who are elderly or disabled. The reductions mean about 5,000 people on a waiting list for care would be taken off indefinitely, said Lynn Breedlove, executive director of the advocacy group Disability Rights Wisconsin.