May 29 (Bloomberg) -- Democratic presidential candidate Barack Obama today announced a plan providing universal health care in the U.S. by 2012, to be paid for chiefly by employers and through tax increases on wealthy Americans.

Obama, 45, an Illinois senator, would increase preventive screening, institute an electronic health records system, allow Medicare to bulk-buy prescription drugs, and provide reinsurance for catastrophic coverage -- steps Obama said could save as much as $100 billion a year in health-care costs.

For those who couldn't afford coverage, Obama would offer subsidized health insurance, expand government Medicaid and children's plans and overhaul the insurance market, he told supporters at the University of Iowa in Iowa City.

``To help pay for this, we will ask all but the smallest businesses who don't make a meaningful contribution today to the health coverage of their employees to do so by supporting this new plan,'' Obama said, according to a text of the speech. He said he would allow temporary tax cuts that President George W. Bush signed into law ``for the wealthiest Americans'' to expire.

Obama's plan, which has been four months in the making, borrows parts of an attempt by the state of Massachusetts to get all its residents insured by July 1. It also has elements similar to plans of Democratic rivals Hillary Clinton, a New York senator, and former North Carolina Senator John Edwards.

All three presidential candidates want to tackle the main issues in the U.S. health-care system: rising costs and the 45 million uninsured.

Three Candidates

Clinton's plan, released last week, focuses on lowering health-care spending by wider use of technology, better measurements of quality and more preventive care. Edwards has detailed how he would get everyone insured by expanding federal programs for the very poor, giving tax credits to make insurance more affordable and creating markets to sell lower-cost policies.

In order to cut costs, Obama would spend $10 billion over five years to move health records from a paper system to an electronic one -- an idea championed by Bush.

``One out of every four dollars we spend on health care is swallowed up by administrative costs -- on needless paperwork and antiquated record-keeping that belongs in the last century,'' Obama said.

A 2005 study by the Santa Monica, California-based Rand Corp. estimated that widespread use of health information technology could save $70 billion annually. Rand estimated it would take 15 years to get full adoption of the new technology.

Obama also supports efforts in Congress to allow Medicare to negotiate prescription drug prices directly -- a move some Democrats say could save as much as $30 billion annually.

Medicare's Drugs

Legislation to that end was passed by the House of Representatives earlier this year, though it has since stalled in the Senate. Even if passed, the measure faces a veto threat from Bush, who says the private insurers have a greater capacity to bring prices down on the open market.

Obama also plans to increase competition among health insurance providers while creating a so-called National Health Insurance Exchange to act as an industry watchdog to help keep costs down.

``When I'm president, we're going to make drug and insurance companies compete for their customers just like every other business in America,'' Obama said.

Overall, Obama said these strategies would reduce premiums for every U.S. household by $2,500 annually.

`Cost Containment'

``In the end, coverage without cost containment will only shift our burdens, not relieve them,'' Obama said. ``So we will take steps to remove the waste and inefficiency from the system so we can bring down costs and improve the quality of our care.''

Obama cited the Massachusetts plan as one example of what states have been forced to do when faced with a broken health- care system.

``The climate is far different than it was the last time we tried this in the early nineties,'' Obama said. ``Since then, rising costs have caused many more businesses to back reform, and in states from Massachusetts to California, Democratic and Republican governors and legislatures have been way ahead of Washington in passing increasingly bolder initiatives to cover the uninsured and cut costs.''

Obama would also allow children to remain on their parents' health insurance until the age of 25, and offer individuals who can't afford private insurance access to a government plan that would be based on the federal employee system. He didn't elaborate on how people would qualify for such a plan.

``It's time to bring together businesses, the medical community, and members of both parties around a comprehensive solution to this crisis,'' Obama said. ``It's time to let the drug and insurance industries know that while they'll get a seat at the table, they don't get to buy every chair.''

To contact the reporters on this story: Jay Newton-Small in Washington at jnewtonsmall@bloomberg.net; Aliza Marcus in Washington at amarcus8@bloomberg.net.

Last Updated: May 29, 2007 12:41 EDT