Budget would reserve $634b for healthcare
Obama signals he will work with Congress
WASHINGTON - President Obama intends to release a budget today that would create a 10-year, $634 billion reserve fund as a down payment on a vast expansion of the US healthcare system, an overhaul expected to cost as much as $1 trillion over the next decade.
Obama would pay for the expansion by trimming tax breaks for the wealthy and tightening payments to insurers, hospitals, and physicians, according to a senior administration official.
By first identifying a large pot of money to underwrite a healthcare overhaul reform - before laying out a proposal on who would be covered or how - Obama hopes to signal his willingness to negotiate with Congress over the details of an eventual plan.
"We wanted to get this process going by putting some serious resources on the table," said the official, who was not permitted to speak publicly until formal release of the budget blueprint. "This is a reserve fund instead of a 700-page plan. We learned the lessons of the past and want to work interactively with Congress. This is a first step."
Yesterday, Douglas Elmendorf, head of the Congressional Budget Office, told the Senate Finance Committee that without changes in policy, the number of uninsured Americans will rise from 45 million to about 54 million over the next decade.
Under the Obama budget blueprint, about half of the new "healthcare reserve fund" would come by limiting the tax break on itemized deductions for families with incomes above $250,000. The proposal would reduce the value of tax deductions by about 20 percent, a change which would generate about $318 billion over the next 10 years, according to administration documents provided to The
Throughout the campaign, Obama promised to reduce the number of uninsured Americans, improve the quality of care, and save the typical American family $2,500 a year in medical costs. He has remained firm to his pledge to press ahead this year.
The budget "includes a historic commitment to comprehensive healthcare reform - a down payment on the principle that we must have quality, affordable healthcare for every American," the president said in his address to Congress Tuesday night. "It's a step we must take if we hope to bring down our deficit in years to come."
Many of the itemized savings are both familiar and controversial to segments of the health industry.
Nearly one-third of the reserve fund would be generated by forcing private insurers who sell Medicare managed care plans to undergo a competitive bidding process. Currently, the government pays the plans, known as Medicare Advantage, about 14 percent more than traditional fee-for-service Medicare coverage, according to estimates by the Congressional Budget Office.
Drug manufacturers and hospitals would face reductions as well. If the budget is approved, drug companies would be required to increase the rebate they now provide for medications sold to Medicaid patients from 15 percent to 21 percent. The proposal will probably spark a ferocious lobbying campaign by the industry, which has argued that the current 15 percent rebate is already cutting into profits.
The budget figures also represent significant shifts in how the United States will pay for medical care in the future.
For example, specialists have identified hospital readmissions - especially for elderly patients - as a sign of inadequate care and unnecessary expense. About 18 percent of Medicare patients are readmitted to the hospital within 30 days of their original visit. The new approach would establish flat fees for the first hospitalization and 30-day follow-up. Hospitals with high readmission rates would be paid less.
According to the Associated Press, Obama's proposed budget also proposes a mix of tax cuts for the middle class and tax increases for upper-income households. That includes extending beyond 2010 the $400 annual tax cut in the stimulus plan just signed into law.
The budget also calls for an increase in the top income tax rate, from 35 percent to 39.6 percent for couples with incomes above $250,000 a year, an administration official said. It would also freeze the estate tax at current levels rather than allowing it to permanently expire next year, the AP reported.
The biggest tax adjustment, however, would come from updating the alternative minimum tax for inflation.