Obama Proposes $634 Billion Fund For Health Care

By Ceci Connolly
Washington Post Staff Writer
Thursday, February 26, 2009

President Obama is proposing to begin a vast expansion of the U.S. health-care system by creating a $634 billion reserve fund over the next decade, launching an overhaul that most experts project will ultimately cost at least $1 trillion.

The "reserve fund" in the budget proposal being released today 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.

Obama aims to make a "very substantial down payment" toward universal coverage by trimming tax breaks for the wealthy and squeezing payments to insurers, hospitals, doctors and drug manufacturers, a senior administration official said yesterday.

Embedded in the budget figures are key policy changes that the administration argues would improve the quality of care and bring much-needed efficiency to a health system that costs $2.3 trillion a year.

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 strategy is largely intended to avoid the mistakes of the Clinton administration, which crafted an extensive proposal in secret for many months before delivering the finished product to lawmakers, who quickly rejected it.

"We aim to get to universal coverage," administration budget aide Keith Fontenot told health-care activists last night. Obama is "open to any ideas people want to put forward. He wants to work openly with the Congress in a very inclusive process."

Virtually every major player in the health-care sector will find something to object to in Obama's plan, an intentional decision made in the hope that "a little bit of pain" will be offset by the appeal of insuring millions more people, said one White House adviser.

About half the money for the new fund would come by capping itemized tax deductions for Americans in the top income bracket. The proposal, which administration officials characterize as a "shared-responsibility issue," would reduce the value of tax deductions for families earning more than $250,000 by about 20 percent, according to administration documents.

Nearly one-third of the money would be generated by eliminating subsidies that the government pays insurers that sell Medicare managed-care plans. Instead, the Medicare Advantage plans would be put under a competitive bidding process, for a savings of $175 billion over the next decade.

"The administration believes it's time to stop this waste," according to the documents.

Even before the budget proposal became public, the Obama team began selling it to groups that will be central to the upcoming debate. Top lawmakers were brought to the White House for briefings, while constituency groups heard the highlights in an evening conference call yesterday.

"This is the first step towards getting health-care reform done this year," White House domestic policy adviser Melody C. Barnes told allies in one call. "We can't underestimate the importance of rallying around this budget. It serves as a footprint for something bigger."

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