Obama’s Health Care Budget: New Spending, New Cuts and Tax Hikes

The Obama administration’s budget plan this week features the creation of $635 billion “reserve fund” to pay for changes in the country’s health care system. It includes roughly equal measures of spending cuts and tax increases.

Based on various news summaries and other reports, here’s what Obama proposed. The estimated value of spending, cuts and tax increases come from the Obama administration.

New Spending

  • Eliminate scheduled payment cuts to physicians. A 21% cut is
    scheduled for 2010; 40% over the next decade.
  • Spend $330 million to address the shortage of health care
    providers in certain areas. This includes loan repayment programs for doctors, nurses
    and dentists who practice in under-served areas. Also, there is assistance for
    nursing schools.
  • Increase cancer research spending at the NIH by $400 million
    to $6 billion.
  • Spend $211 million at the HHS for research into autism, as
    well as for screening, public awareness and support services for autism
  • Spend $12 billion in quality incentives to hospitals: $12
    billion over 10 years

Spending Cuts

  • Eliminate the 14% worth of higher payments that Medicare
    Advantage plans now get from the federal government and require them to submit
    to competitive bidding. Savings: $177 billion over 10 years. Medicare Advantage
    plans cover about 23% of Medicare beneficiaries.
  • Set up a "regulatory pathway" to approve generic
    versions of biologic drugs developed by biotechnology companies. Savings: $9.2 billion over 10 years.
  • Require drug makers to provide bigger discounts to Medicaid.
    Savings: $19.5 billion over 10 years
  • Bundle Medicare payments for hospital and post-hospital care,
    to be split by physicians and hospitals. Savings: $17.8 billion over 10 years
  • Cut payments for hospitals for preventable readmissions.
    $8.4 billion over 10 years.
  • Reduce payments to home health agencies by $37 billion over
    10 years.
  • Use radiology benefit managers in Medicare. Savings: $260
    million over 10 years
  • Total value of spending cuts: $316 billion

Tax increases

  • Increase top tax bracket to 39.6% (currently 35%)
  • Limit deductions for mortgage interest and charitable
    donations by taxpayers in the top two tax brackets to 28%.
  • Increase premiums for Medicare prescription drugs plans for
    high-earning taxpayers ($8 billion over 10 years)
  • Allow tax cuts for upper income taxpayers to phase out in
  • Block phase out of the estate tax
  • Total value of tax increases: $318 billion

What do you think? What's realistic, and what's not?

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