McCain cutting Medicare and Medicaid

Following a WSJ article on the McCain campaign's new plan to cut Medicare and Medicaid costs to keep their health care proposal budget-neutral without raising anyone's taxes, Jonathan Cohn reviews:

First McCain said he would elimine the entire tax deduction for health insurance, in order to pay for his new tax credit. This would have paid for itself, but it would have done so by raising taxes on a lot of people.
Then McCain decided he was keeping part of the deduction after all. While he would be raising taxes on a very few people, he'd be lowering them for most. Of course, that would also have meant running much bigger deficits.
Now McCain is saying, no, no, he's not going to increase the deficit with his health care plan. Instead, he's going to pay for it by cutting Medicare and Medicaid--which, at the levels he's discussing, might seriously weaken the program.
I can't wait to see what they come up with next.

To be clear: Democrats have been saying for years that Medicare costs should be cut - by rewriting the ridiculous corporate boondoggle of Medicare Part D, and using Medicare's size and clout to force drug prices down. But that would involve a government invervention in the health care market that John McCain and the GOP oppose. So how does he jam this square peg in its round hole?