Obama Pledges $634 Billion for Health Care, Says More Is Needed

President Barack Obama proposed spending $634 billion to expand U.S. health care, financing the “down payment” with increased taxes on wealthy Americans and less government money for some drugmakers and health insurers.

The budget outline, presented today to Congress, calls for spending the money over 10 years while offsetting about half by limiting tax deductions for couples making more than $250,000 a year. The outline would stop the “waste” in government payments to Humana Inc. and companies like it that provide special plans for the elderly. It would also squeeze discounts to drugmakers, among them Pfizer Inc., that supply medicines to the poor.

Obama at the same time said Congress will have to come up with additional money to pay the full cost of making health care affordable to all and available to the 46 million Americans now without medical insurance. He said in the budget plan he was open to “all serious ideas,” including taxing employer-provided health benefits, something he opposed during his campaign. Economists say the full cost may reach $1.5 trillion.

“An unhealthy workforce leads to an unhealthy economy,” Obama said today in the budget document. “Moving to provide all Americans with health insurance is not only a moral imperative, but it is also essential to a more effective and efficient health care system.”

The plan calls for requiring Humana, UnitedHealth Group Inc., and WellPoint Inc. to enter a competitive bidding process to offer what are known as Medicare Advantage plans, which bundle benefits and add more services and benefits than what the elderly get when they obtain coverage directly from the government.

Advantage Savings

The proposal would save $175 billion over 10 years, the Obama administration said. About 10.5 million elderly Americans receive coverage through those Advantage plans. The savings would start in 2012, with $11 billion, and rise to $30 billion by 2019, according to the budget.

The companies are paid on average 14 percent more than it costs Medicare to provide benefits directly, according to government estimates.

“A significant portion of his proposed savings will come at the expense of high quality, high value health care coverage for millions of America’s seniors,” said Cheryl Leamon, a spokeswoman for WellPoint, based in Indianapolis, in an e-mailed statement.

The budget would “bring down the drug costs” of Medicaid, the joint U.S.-state health program for the poor, raising $19.5 billion between 2010 and 2019, according to the document. The price break to the government, in the form of rebates, for brand- name drugs would increase to 22.1 percent of the average wholesale price from 15.1 percent.

Hospital Payments

Obama also proposed that hospitals get “bundled” payments for treating patients, instead of getting reimbursed for each procedure done, which health policy experts say can encourage providers to do more to get more money. Hospitals with high rates of readmissions within the same 30-day period will be penalized. This would save about $26 billion over the 10-year period.

“Both of these proposals are extremely complex and the devil’s in the details,” said Chip Kahn, president of the Federation of American Hospitals, which represents about 17 percent of U.S. hospitals. “We have to figure out what the impact is first before we proceed.