[Ip-health] Obama planning to take on health insurance, drug companies to finance health care reform

[Sarah Rimmington]

The Washington Post is reporting that Obama's first budget (which is
being released tomorrow) is said to include a $634 B reserve fund to pay
for health care reform. He plans to pay for it by trimming tax breaks to
families earning more than $250,000 and reducing government payments to
insurers, drug companies and hospitals (mostly related to Medicare and
Medicaid from what I can tell). See the key snippet re drug companies:

[snip]Drug manufacturers and hospitals would face reductions as well. If
the budget is approved, drug companies would be required to increase the
rebate they now provide for medications sold to Medicaid patients from
15 percent to 21 percent. The proposal would likely spark a ferocious
lobbying campaign by the industry, which has argued that the current 15
percent rebate is already cutting into profits.[snip]



Obama Budget Would Create $634 Billion Health-Care Fund

By Ceci Connolly
Washington Post Staff Writer
Wednesday, February 25, 2009; 4:22 PM

President Obama intends to release a budget tomorrow that creates a
10-year, $634 billion "reserve fund" to partially pay for a vast
expansion of the U.S. health care system, an overhaul that many experts
project will cost as much as $1 trillion over the next decade.

Obama would pay for the expansion by trimming tax breaks for the wealthy
and tightening payments to insurers, hospitals and physicians, according
to a senior administration official.

By first identifying a large pot of money to underwrite health care
reform -- before laying out a proposal on who would be covered or how --
Obama hopes to signal his willingness to negotiate with Congress over
the details of an eventual plan.

"We wanted to get this process going by putting some serious resources
on the table," said the official, who was not permitted to speak on the
record until formal release of the budget blueprint. "This is a reserve
fund, instead of a 700-page plan. We learned the lessons of the past and
want to work interactively with Congress. This is a first step."

Under the Obama budget blueprint, about half of the new "health care
reserve fund" would come by limiting the tax break on itemized
deductions for families with incomes above $250,000. The proposal would
reduce the value of tax deductions by about 20 percent, a change which
would generate about $318 billion over the next 10 years, according to
administration documents provided to The Washington Post.

Throughout the campaign, Obama promised to reduce the number of
uninsured Americans, improve the quality of care in the country and save
the typical American family $2,500 a year in medical costs. Despite an
ever-weakening economy and skyrocketing federal deficit, he has remained
firm to his pledge to press ahead this year.

The budget "includes a historic commitment to comprehensive health care
reform -- a downpayment on the principle that we must have quality,
affordable health care for every American," the President said in his
address to Congress Tuesday night. "It's a step we must take if we hope
to bring down our deficit in years to come."

Many of the itemized savings are both familiar and controversial to
segments of the health industry.

Nearly one-third of the reserve fund would be generated by forcing
private insurers who sell Medicare managed care plans to undergo a
competitive bidding process. Currently, the government pays the plans,
known as Medicare Advantage, about 14 percent more than traditional
fee-for-service Medicare coverage, according to estimates by the
Congressional Budget Office.

"The administration believes it's time to stop this waste," according to
the document. That provision is estimated to save $175 billion over the
next decade.

Drug manufacturers and hospitals would face reductions as well. If the
budget is approved, drug companies would be required to increase the
rebate they now provide for medications sold to Medicaid patients from
15 percent to 21 percent. The proposal would likely spark a ferocious
lobbying campaign by the industry, which has argued that the current 15
percent rebate is already cutting into profits.

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

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

Spending on Medicare and Medicaid, the government's two primary
safety-net health programs, currently consumes 5 percent of the gross
domestic product, or $660 billion a year. Absent restructuring, the two
safety-net programs will equal 12 percent of the GDP by 2050.

Earlier today, the Senate Finance Committee held a hearing to review
possible budget changes with the head of the Congressional Budget Office.

Without changes in policy, said Douglas Elmendorf, the number of
uninsured Americans will rise from 45 million to about 54 million over
the next decade.

"We cannot afford to delay health care reform," Chairman Max Baucus
(D-Mont.) said in opening remarks. "Delay will make the problems that we
face today even worse. If we delay, millions more Americans will lose
coverage. If we delay, premiums will grow even farther out of reach. And
if we delay, federal health spending will absorb an even greater share
of the nation's economy."