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Obama Wants $634 Billion for Health Care

White House Says Money Is a 'Down Payment' on Health Care Reform

WebMD Health News

Feb. 26, 2009 -- President Obama has proposed setting aside $634 billion in federal money over the next decade to aid his health reform plans.

The White House calls the move a "down payment" on overhauling the faltering U.S. health care system.

The money, in the form of a reserve fund, would go to a range of initiatives, including health and wellness improvements, improvements in patient safety, and an "aim" for universal health insurance coverage, according to a budget outline released by the White House.

"The President recognizes that while a very large amount of money and a major commitment, $630 billion is not sufficient to fully fund comprehensive reform. But this is a first crucial step in that effort," the outline states.

The president proposed raising the money from two main sources: dialing back tax deductions for families making more than $250,000 per year and cutting federal subsidies for insurance companies that administer the Medicare Advantage managed care program.

The budget is only the first step in a months-long debate over the entire federal budget and overall health reform plans. But it was a strong signal that the president intends to place health costs and access to care at the center of efforts to rehabilitate the economy.

Congress will have to pass its own budget plan, likely in the spring. And a debate on health care reform could go on for months after that.

Reaction in Congress

Democrats on Capitol Hill praised the proposal, saying it sets the stage for an overdue health care debate.

Sen. Edward Kennedy, D-Mass., issued a statement calling the budget "an historic commitment to the goal of quality, affordable health care for all Americans."

"I'm optimistic that Congress is now ready to answer the challenge of enacting legislation to reach that goal, and the funds proposed in the budget are an essential starting point for our effort," said Kennedy, who chairs the Senate Health, Education, Labor, and Pensions Committee.

But Republicans were less supportive. The White House proposal to cut $175 billion from payments to Medicare Advantage managed care plans riled GOP lawmakers, who broadly support a bigger role for private insurance companies in Medicare.

"I want to look at the details of the program, but obviously, if it guts the program and prohibits the program from succeeding, it's going to make people really unhappy, and it's going to hurt seniors' access to affordable care and choice," Rep. Paul Ryan, R-Wis., tells WebMD. Ryan is the senior Republican on the House Budget Committee.

In addition to tax increases on wealthier families and Medicare Advantage cuts, the White House plan also raises money for health reform by:

  • Speeding lower-cost generic drugs to market with regulatory changes and making it harder for brand-name drug manufacturers to use legal suits to bar generics from the market.
  • Reforming the way Medicare and Medicaid pay doctors, hospitals, and other health providers, including a plan to give doctors incentive payments for higher quality care.
  • Reducing hospital readmissions.

White House officials and congressional Democrats have said they intend to pass a major health reform bill by the fall. Ron Pollack, executive director of the liberal-leaning consumer health group Families USA, says the White House proposal "augurs well for getting reform done this year."

"We'll have a bill by 2011," said Rep. Jim McDermott, D-Wash., a member of the House Ways and Means health subcommittee, when asked if Congress would meet the president's call to enact health reform this year. "I know he wants it this year, and it will take a little longer than that."

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