President Obama's Budget Outline Would Provide $634B Over 10 Years For Universal Health Coverage

Main Category: Health Insurance / Medical Insurance
Also Included In: Public Health
Article Date: 27 Feb 2009 - 4:00 PDT

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President Obama on Thursday 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 universal health coverage, 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).

The proposal does not outline specific plans for expanding health insurance coverage and other aspects of reform (Levey, Los Angeles Times, 2/26). However, the proposal includes 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).

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).

Reserve Fund Details
The health care reserve fund financing, "half of which would come from health-related expenses and half by scaling back the value of itemized deductions for wealthier taxpayers," is considered a "down payment toward health care reform" (Rogers, The Politico, 2/25). The change in itemized deductions would apply to residents in the 33% to 35% tax bracket range, or those who have annual incomes of more than $250,000 (Calmes/Pear, New York Times, 2/26). The proposal would cap itemized tax deductions for those residents by about 20% (Connolly, Washington Post, 2/26). The tax increase would raise revenue by $300 billion over 10 years (Clarke/Schatz, CQ Today, 2/25).

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 over 10 years 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.

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).

Policy Changes
The budget proposal also includes 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).

The proposal is available online.

Reaction
House Minority Leader John Boehner (R-Ohio) said of the tax increases included in the budget proposal, "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).

Drew Altman, president and CEO of the Kaiser Family Foundation, said, "What this does is, it allows the train to move forward," but "there are still big issues to work out about how to reform health care and how to come up with the rest of the money" (Connolly, Washington Post, 2/26).

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
Senate Majority Leader Harry Reid (D-Nev.) on Wednesday said that the Senate will seek to address health care reform legislation by the end of the year. He said, "By the end of this year, I want to do something significant dealing with health care" (Murray/Kane, Washington Post, 2/26). Reid said that he would "like to get health care started before the August recess," but he did not specify if that would entail committee votes or floor debates, CQ Today reports (Jansen, CQ Today, 2/25). Senate Finance Committee Chair Max Baucus (D-Mont.) also 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).

Omnibus Appropriations Bill
In related news, the House on Wednesday voted 245-178, in part along party lines, to approve an omnibus appropriations bill (HR 1105) that includes the FY 2009 Labor-HHS-Education appropriations bill and the eight other unapproved FY 2009 appropriations bills, the AP/USA Today reports (AP/USA Today, 2/26). Since October 2008, the federal government has operated under a continuing resolution that will fund most Cabinet departments and federal agencies at FY 2008 levels until March 6. The omnibus appropriations bill would fund those departments and agencies from March 7 until Sept. 30, the end of the fiscal year (Bacon, Washington Post, 2/26). The omnibus appropriations bill would provide about an 8%, or $31 billion, increase over comparable budgets for those departments and agencies in FY 2008 (Pear, New York Times, 2/26).

The Senate might not consider the bill until next week (Clarke/Schatz, CQ Today, 2/25). Reid said that the Senate will complete work on the bill by the March 6 deadline (Sanchez, CongressDaily, 2/26).

Editorials

• Boston Globe: Obama in his speech this week "vowed, in broad terms, to address the growing costs of Social Security and Medicare," but the "president cannot make these things happen on his own," a Globe editorial states. According to the editorial, "perhaps Medicare reforms are best bundled, as Obama suggested in his speech, with a larger overhaul of the health care system," but "Obama's glancing treatment of the subject bespoke little confidence that he can bring his own party to a point of compromise on the issue" (Boston Globe, 2/26).
  
  
• The Hill: Health care reform had "been an open question, but President Obama answered it Tuesday night" in his speech, according to an editorial in The Hill. "Reform has its best chance this year," as much "of the groundwork has already been laid out," the editorial states. The editorial concludes, "There are many debates ahead, but the matter of when to act on health care is over. It's happening now" (The Hill, 2/25).
  
  
• Houston Chronicle: "Given all the other four-alarm fires confronting him, it would have been understandable if Obama had chosen to shelve health care for now," but in his speech this week he announced plans to address the issue, a Chronicle editorial states. A "new day in health care has already dawned with the passage of the SCHIP bill," and Obama "signaled that more reform will be coming," the editorial states, adding, "It cannot wait" (Houston Chronicle, 2/25).
  
  
• Philadelphia Inquirer: The "burden" of health care and energy "on the economy isn't news, but a sustained focus on the problem is past due," an Inquirer editorial states. The editorial adds, "Taking on these issues is enormously ambitious," but "Obama has brought a needed urgency to fixing problems the country can no longer afford to postpone" (Philadelphia Inquirer, 2/26).

Opinion Pieces

• Michael Tanner, Baltimore Sun: "President Obama is right" about the need to "reform health care," but "not the way he wants to do it," Cato Institute senior fellow Tanner writes in a Sun opinion piece. He adds, "We know, from the failure of national health care systems around the world as well as the inefficiency, high cost and poor quality of government-run health care systems here at home, ... that that is not the type of health reform that we need." In addition, Tanner writes, "Real health care reform should empower health care consumers, not government bureaucrats" (Tanner, Baltimore Sun, 2/26).
  
  
• Morton Kondracke, Roll Call: The "wave of paranoia" that "ripped through the right and left wings earlier this month over health initiatives in the economic stimulus package" was "just a small demonstration of struggles to come" on health care, Roll Call Executive Editor Kondracke writes. According to Kondracke, to "prevent scare tactics and suspicion from torpedoing health care reform before it gets launched, it's a good idea for President Barack Obama to convene a broad 'health care summit' to begin a public bipartisan dialogue" (Kondracke, Roll Call, 2/26).
  
  
• Baucus/Sen. Edward Kennedy (D-Mass.), Wall Street Journal: 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 Kennedy, 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).
  
  
• David Broder, Washington Post: The House on Tuesday night "was filled with veteran legislators who ... know how maddeningly difficult it has been to cobble together a coalition large enough to pass a significant education, health care or energy bill," but "here stood Obama, challenging them to do all three," Post columnist Broder writes. He adds, "The risk to Obama's ambitions is likely to arise less from the defeated Republicans than from the victorious Democrats, who have all too many ideas of their own about what should be done in energy, health care and education" (Broder, Washington Post, 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). A transcript of the show is available online.
  
  
• NPR's "Morning Edition" on Thursday reported on the budget proposal (Horsley, "Morning Edition," NPR, 2/26).

Reprinted with kind permission from http://www.kaisernetwork.org. You can view the entire Kaiser Daily Health Policy Report, search the archives, or sign up for email delivery at http://www.kaisernetwork.org/dailyreports/healthpolicy. The Kaiser Daily Health Policy Report is published for kaisernetwork.org, a free service of The Henry J. Kaiser Family Foundation.

© 2009 Advisory Board Company and Kaiser Family Foundation. All rights reserved.

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