The Obama administration will announce a 10-year, $634 billion reserve fund Thursday aimed at expanding health care coverage – and will pay for half the plan with a new tax hike on wealthy Americans that surprised health care advocates and angered Republicans.
Ahead of Thursday’s budget release, administration officials said Obama will adhere to eight principles to guide his health reform effort, including allowing patients to maintain their choice of insurers and doctors, POLITICO has learned.
The officials, speaking on a conference call Wednesday to health-care insiders, described Obama’s plan as a “down-payment” on a covering all Americans. In fact, the Obama team is coining a new phrase – that he’ll “aim for universality,” without offering specifics of how he would reach that goal, or when. He wants Congress to fill in the details.
“The goal is still to bring down the cost of care and to get universal coverage,” said an administration source.
In the conference call, White House health care officials repeatedly stressed how critical the budget was to the larger health care reform effort.
"We can't underestimate the importance of rallying around this budget and making sure that in fact it goes forward and serves as a footprint for something bigger and something larger with regard to our health care plan," said Melody Barnes, director of the White House Domestic Policy Council.
And he’ll pay for half his plan — $318 billion over 10 years – with new tax hike on Americans making more than $250,000.
Obama had pledged throughout his campaign to roll back Bush tax cuts for Americans making more than $250,000 a year in fiscal year 2011 – a plan that also will be included in Thursday’s budget — but this is different, aimed at reducing the itemized deduction rate for those taxpayers.
Some advocates for universal health coverage said they were surprised to learn that Obama would turn to a tax increase to create a dedicated fund for his program. The other half of the $634 billion would come from changes in savings in Medicare, including ending subsides to private insurance companies that participate in the Medicare Advantage programs in rural areas.
But the tax increase also opened Obama up to criticism from the congressional Republicans, who sensed an opening to attack Obama over one of the oldest political fault lines in Wahsington, tax increases.
"Everyone agrees that all Americans deserve access to affordable health care, but is increasing taxes during an economic recession, especially on small businesses, the right way to accomplish that goal? Given the size of our $1.2 trillion deficit, a proposal costing up to $1 trillion must raise troubling questions," House Minority Leader John Boehner (R-Ohio) said in a statement.
Under current law, high earners who are in the 35 percent tax bracket can take deductions at that rate. Under Obama’s plan, they would be capped at 28 percent – meaning instead of getting $3,500 back from $10,000 in mortgage interest or other deductions, these taxpayers would get $2,800. The plan would phase in during fiscal year 2011, just as Obama plans to let the Bush tax cuts expire.
Ahead of the release of his budget Thursday, Obama has endorsed eight guiding principles for health reform, the White House officials said on the conference call. They stressed that they intend to work with lawmakers and other stakeholders on how to accomplish the goals, but the principles will lay down a marker for any congressional plan.
Other goals include maintaining choice of insurance and doctors, ensuring affordable coverage, protecting Americans financial health, investing in prevention and wellness, improving patient safety and quality of care and is fiscally responsible, sustainable and portable.
Early reviews for Obama's effort were favorable from health-care advocates.
"We think this is an enormously positive step in the right direction," said Ron Pollack, executive director of Families USA, a consumer health advocacy group. "What is so remarkable is within 24 hours of saying health care reform must be done, the president showed his commitment to putting significant money on the table in a fiscally responsible way."
Anna Burger, secretary-treasurer of Service Employees International Union, said Congress “must continue to step up with the same commitment and work with the president to pass comprehensive health care reform this year.”
“The American people expect solutions, not excuses,” Burger said.
Obama previewed his broader plans for health care in his address to Congress Tuesday night, saying his budget contained "a commitment to comprehensive health care reform - a down payment on the principle that we must have quality, affordable health care for every American."
Obama has generally shied away from using the term "universal health care" and the $634 billion is not being billed as an achievement of that goal but a big step in that direction. About 47 million Americans don't have health insurance.
OMB chief Peter Orszag is to announce the plan while outlining Obama's budget in a press conference Thursday.
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