Obama Budget Proposal Includes Plan To Fund Health Care Reform

On Thursday, President Obama released an outline of a more than $3.1 trillion fiscal year 2010 budget proposal that will include a 10-year, $634 billion reserve fund to help finance comprehensive health care reform, the New York Daily News reports (Bazinet/McAuliff, New York Daily News, 2/26).

According to the proposal, Obama would remain "committed to working with the Congress to find additional resources" to finance the remainder of the cost of health care reform (Wolf, USA Today, 2/26). Health care reform likely will cost at least $1 trillion.

The proposal was not expected to include a specific health care reform plan (Levey, Los Angeles Times, 2/26). However, the proposal was not expected to include general guidelines for health care reform that would place the U.S. on a "clear path to cover all Americans" and allow U.S. residents to have a choice of health plans (Meckler, Wall Street Journal, 2/26).

Reserve Fund Details

The budget proposal would finance half of the reserve fund with increased revenue and half with reduced spending in other areas (Rogers, The Politico, 2/25).

The proposal would increase taxes for residents in the 33% to 35% tax bracket range, or those who have annual incomes of more than $250,000, to help finance the reserve fund (Calmes/Pear, New York Times, 2/26). The tax increase would raise revenue by $300 billion over 10 years. The proposal also would allow tax cuts for those residents to expire (Clarke/Schatz, CQ Today, 2/25).

In addition, the proposal would cap itemized tax deductions for those residents by about 20% (Connolly, Washington Post, 2/26).

The proposal also would seek to reduce spending by more than $300 billion over 10 years to help finance the reserve fund (McClatchy/Miami Herald, 2/25).

The spending reduction would include the elimination of $177 billion in subsidies paid to health insurers that operate Medicare Advantage plans and the implementation of a competitive bidding process for such plans (Fuhrmans, Wall Street Journal, 2/26).

In addition, the proposal would increase the rate of the rebate that pharmaceutical companies pay for medications sold to Medicaid from 15% to 21% to reduce spending by $19.5 billion. The proposal also would increase premiums for Medicare prescription drug coverage for higher-income beneficiaries.

Policy Changes

The budget proposal also will include policy changes that would seek to improve the quality and efficiency of health care and reduce costs. Under the proposal, Medicare would pay hospitals a flat fee for the first hospitalization and 30 days of follow-up care, rather than reimburse them on a fee-for-service basis, to help improve the quality of care and reduce readmission rates (Connolly, Washington Post, 2/26).

In addition, the proposal would facilitate market entry of generic versions of biotechnology medications (Wangsness/Wallack, Boston Globe, 2/26).

The proposal also would end "evergreening," a practice that allows brand-name pharmaceutical companies to reformulate their products to extend patent protection (Mundy, Wall Street Journal, 2/25).

What It Means

According to the Washington Post, the reserve fund "is Obama's attempt to demonstrate how the country could extend health insurance to millions more Americans and at the same time begin to control escalating medical bills that threaten the solvency of families, businesses and the government."

In addition, by "first identifying a large pot of money to underwrite health care reform -- before laying out a proposal on who would be covered or how -- Obama hopes to draw Congress to the bargaining table to tackle the details of a comprehensive plan," the Post reports (Connolly, Washington Post, 2/26).

The reserve fund also signals that Obama "is serious about fulfilling his pledge to enact comprehensive health care legislation this year," according to the Wall Street Journal (Meckler, Wall Street Journal, 2/26).

Administration Comments

White House domestic policy adviser Melody Barnes said of the proposal, "This is the first step towards getting health care reform done this year."

Neera Tanden, a top Obama health care adviser, said, "We know that this is not enough to achieve our overall goal of getting health care for every American, but it is a significant down payment."

Administration budget aide Keith Fontenot said, "We aim to get to universal coverage" and remain "open to any ideas people want to put forward," adding, "He wants to work openly with the Congress in a very inclusive process" (Connolly, Washington Post, 2/26).

Obama next week will host a White House summit that will focus on health care reform (Thomma, McClatchy/Miami Herald, 2/25).

White House Press Secretary Robert Gibbs said, "The (health care) process starts formally next week here" (Koffler, Roll Call, 2/25).

Reaction

Regarding the tax increases in the proposal, House Minority Leader John Boehner (R-Ohio), "Everyone agrees that all Americans deserve access to affordable health care, but is increasing taxes during an economic recession, especially on small businesses, the right way to accomplish that goal?" (Connolly, Washington Post, 2/26).

According to Senate Finance Committee ranking member Chuck Grassley (R-Iowa), the proposal seems to balance on a "razor's edge between a broken health care system and fiscal catastrophe" (Alonso-Zaldivar/Taylor, AP/Houston Chronicle, 2/25).

America's Health Insurance Plans spokesperson Robert Zirkelbach said, "We will be a constructive participant in efforts to reform all parts of Medicare" (Meckler, Wall Street Journal, 2/26). He added, "This proposal asks seniors to pay a disproportionate share of the cost of health care reform" (Los Angeles Times, 2/26).

Ron Pollack, executive director of Families USA, called the reserve fund an "enormous fiscal commitment to health care reform" (Wolf, USA Today, 2/26). He said, "We think this is an enormously positive step in the right direction," adding, "What is so remarkable is within 24 hours of saying health care reform must be done, the president showed his commitment to putting significant money on the table in a fiscally responsible way."

Anna Burger, secretary-treasurer of the Service Employees International Union, said that Congress "must continue to step up with the same commitment and work with the president to pass comprehensive health care reform this year" (Martin et al., The Politico, 2/25).

Prospects in Congress

On Wednesday, Senate Majority Leader Harry Reid (D-Nev.) said, "By the end of this year, I want to do something significant dealing with health care" (Murray/Kane, Washington Post, 2/26).

Senate Finance Committee Chair Max Baucus (D-Mont.) said that the Senate might pass health care reform legislation before the August recess (Calmes/Pear, New York Times, 2/26).

House Majority Leader Steny Hoyer (D-Md.) said that the House will address health care reform legislation no earlier than May (Murray/Kane, Washington Post, 2/26). He said, "I'd like to get health care started before the August recess"(Friedman, CongressDaily, 2/25).

Baucus, Kennedy Opinion Piece

Lawmakers must "turn our attention to comprehensive health care reform and move quickly with President Obama to fix our broken system" because a resolution of the "nation's health care crisis is a fundamental part of healing our economy," Baucus and Sen. Edward Kennedy (D-Mass.), chair of the Senate, Health, Education, Labor and Pensions Committee, write in a Journal opinion piece.

They conclude, "The challenge of crafting this public policy is certainly large," but "just as Congress and the president first met the challenges of restoring our nation's economy, we must also keep our commitment to reforming health care -- now" (Baucus/Kennedy, Wall Street Journal, 2/26).

Letter to the Editor

"Skyrocketing costs for individual health insurance plans, coupled with the growing number of unemployed who must now shop for such a plan, illustrate just why we need high-quality, affordable coverage for all Americans," American Medical Association Board Chair Joseph Heyman writes in a USA Today letter to the editor.

The letter states, "We are encouraged by recent congressional actions that renew and expand health care coverage for poor children and the unemployed," adding, "Let's build on that momentum and work on comprehensive health system reform that makes private insurance more affordable, increases the value our nation receives from its health care spending, and enhances prevention and wellness for America's patients."

Heyman writes that AMA "is actively working to improve the health care system for America's patients and the physicians who care for them" (Heyman, USA Today, 2/26).

Broadcast Coverage

ABC's "World News Tonight" on Wednesday reported on the reserve fund for health care reform included in the budget proposal (Gibson, "World News Tonight," ABC, 2/25).
American Public Media's "Marketplace" on Thursday reported on the tax increases included in the budget proposal (Grech, "Marketplace," American Public Media, 2/26).
CNN's "Anderson Cooper 360" on Wednesday reported on the reserve fund (Henry, "Anderson Cooper 360," CNN, 2/25).
NPR's "Morning Edition" on Thursday reported on the budget proposal (Horsley, "Morning Edition," NPR, 2/26).

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