THE ASSOCIATED PRESS
WASHINGTON—President Barack Obama's first budget will seek $634 billion over 10 years as a down payment on health care reform—a little more than half what it may ultimately cost to provide every American with medical coverage.
The budget also proposes a mix of tax cuts for the middle class and tax increases for upper-income households. That includes extending beyond 2010 the $400 annual tax cut in the stimulus plan just signed into law.
The disclosures came from two administration officials, who spoke on condition of anonymity because the budget won't be made public until Thursday.
Obama claims his plan can reduce the extraordinary $1.5 trillion deficit this year to $533 billion in 2013—an uncertain goal given the turbulent economy.
The health care provisions are 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.
Independent experts say providing coverage for all could easily cost more than $1 trillion over 10 years, a figure the Obama administration does not dispute. Lawmakers on Capitol Hill, however, are concerned about that cost.
Budget documents provided to The Associated Press show that Obama will not lay out a detailed blueprint for a health care overhaul, but rather a set of broad policy principles and some specific ideas for how to raise a big chunk of the money.
Whatever Congress does, the documents said, "must put the United States on a clear path to cover all Americans." Obama has called on Congress to send him a health care reform bill this year.
Obama's principles include guaranteeing people a choice of insurance plans and doctors and continuing employer-based coverage. He also says Americans should be able to take their health care benefits with them when they change jobs.
The $634 billion would be on top of recent health care expansions approved by Congress and also described by the administration as down payments toward overhauling health care. 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.
Apart from health care, the budget will extend Obama's signature $400 tax cut for workers, and $800 for married couples.
The budget also calls for an increase in the top income tax rate, from 35% to 39.6% for married 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.
The budget would also freeze the estate tax at current levels rather than allowing it to permanently expire next year.
Even before the budget arrives on Capitol Hill, senior lawmakers from both parties are saying they are concerned about the cost of health care reform.
Almost no one believes that Americans are getting good value for their health care dollars. Some experts say 30% 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.
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. Married couples making more than $250,000 would get a limited deduction for charitable contributions, local taxes and other expenses. Rather than reaping close to 40¢ on the dollar, they would be limited to 28 cents.
Such proposals are deeply controversial, particularly with nonprofit institutions that depend on wealthy donors.