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Obama Proposes $634 Billion Fund For Health Care

During the campaign, Obama promised to reduce the number of uninsured Americans, improve the quality of care and save the typical family $2,500 a year in medical costs.

"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," Neera Tanden, a top Obama health adviser, said during a conference call.

Given the economic crisis and the soaring federal deficit, many had begun to fear that health reform would be postponed, said Drew Altman, president of the nonprofit Kaiser Family Foundation.

"What this does is, it allows the train to move forward," he said. "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."

Many of the targeted savings are familiar and controversial.

If the tax-deduction cap is enacted, it is likely to hit many small businesses, said House Republican Leader John A. Boehner (Ohio).

"Everyone agrees that all Americans deserve access to affordable health care," he said, "but is increasing taxes during an economic recession, especially on small businesses, the right way to accomplish that goal?"

If the budget is approved by Congress, drug companies will be required to increase the rebate they pay on medications sold to Medicaid patients from 15 percent to 21 percent. The proposal, which would raise $19.5 billion over 10 years, is likely to spark strong opposition from the industry, which has argued that the current rebate cuts into profits.

Wealthy senior citizens would also be asked to pay higher premiums for Medicare drug coverage, similar to the higher premiums they now pay for physician visits, according to the Obama blueprint.

The budget figures also represent significant shifts in how the United States will pay for medical care.

For example, experts have identified hospital readmissions -- especially for elderly patients -- as a sign of poor care and unnecessary expense. About 18 percent of Medicare patients are readmitted to the hospital within 30 days of an original visit. The new approach would establish flat fees for the first hospitalization and 30 days of follow-up, sometimes done by separate facilities. Hospitals or clinics with high readmission rates could be paid less.

Obama, who is set to host a White House summit on health reform next week, has argued that reining in health spending is critical to the nation's long-term fiscal outlook.

Medicare and Medicaid, the government's two primary safety-net health programs, currently consume 5 percent of the gross domestic product, or $660 billion a year. At their current growth rates, absent restructuring, the two programs will equal 12 percent of the GDP by 2050.

Health-care costs are "one of the major reasons why small businesses close their doors and corporations ship jobs overseas," Obama said in a speech to Congress on Tuesday night.

"This is a cost that now causes a bankruptcy in America every 30 seconds. By the end of the year, it could cause 1.5 million Americans to lose their homes," he said. ". . . Given these facts, we can no longer afford to put health-care reform on hold."

Staff writer Shailagh Murray contributed to this report.

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