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Obama seeks $634b over 10 years for health care

(Agencies)
Updated: 2009-02-26 09:05

WASHINGTON – US President Barack Obama's first budget will seek $634 billion over 10 years as a down payment on health care reform, a senior administration official said Wednesday. The official said Obama's proposal is meant to start a dialogue with Congress over how to provide coverage for an estimated 48 million uninsured while also slowing health care costs, which amount to $2.4 trillion a year and keep rising even as the economy is shrinking.

US President Barack Obama makes comments at Diplomatic Reception Room of the White House in Washington, Wednesday, February 25, 2009, after an economic meeting. [Agencies]

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The senior official spoke on condition of anonymity because the budget won't be released until Thursday.

Obama's request comes on top of recent health care expansions approved by Congress and also described by his administration as down payments toward overhauling the health care system. Those include $32 billion to expand coverage for the children of low-income workers and $19 billion to speed the adoption of computerized health records.

Aside from health care, the budget will extend Obama's signature $400 tax cut for workers, originally enacted as part of the economic stimulus plan.

The budget also calls for an increase in the top income tax rate, from 35 percent to 39.6 percent for couples with incomes above $250,000 a year, said another administration official.

The biggest tax adjustment, however, would come from updating the alternative minimum tax for inflation. That would add $150 billion to the deficit by 2013. The AMT was originally designed to make sure the wealthy paid at least some taxes, but it threatens to ensnare some 24 million middle- to upper-income taxpayers next year.

Obama has called on Congress to send him a health care reform bill this year, but even before the budget arrives on Capitol Hill, senior members of both parties say they are concerned about the cost.

Almost no one believes that Americans are getting good value for their health care dollars. Some experts say 30 percent or more of what the nation spends may be going for tests and treatments of little or no lasting benefit.

But bringing the uninsured into such a costly system won't be easy. Experts say the cost could easily exceed $1 trillion over 10 years, a figure that the Obama administration does not dispute.

Against that backdrop, "it's very hard for me to understand why the answer is to put more money into the system," Senate Budget Chairman Kent Conrad, D-N.D., said at a hearing Wednesday.

Sen. Charles Grassley of Iowa, the senior Republican on the Finance Committee, warned that Obama is walking "a razor's edge between a broken health care system and fiscal catastrophe."

But administration officials say overhauling the health care system to slow increases in costs and get everybody covered is essential to solving the nation's long-term budget problems. They argue that it may take a big investment up front to reap significant dividends over the long term.

The $634 billion Obama wants to set aside for health care would be almost evenly divided between spending reductions and tax increases.

Obama's plan would trim $316 billion over 10 years from Medicare. Some of the savings would come from scaling back payments to private insurance plans that serve older Americans, which many analysts believe to be inflated. Other proposals include charging upper-income beneficiaries a higher premium for Medicare's prescription drug coverage.

The health care proposal would also limit tax deductions for upper-income individuals and families, raising about $318 billion over 10 years.