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Obama Wants New Cuts in Federal Health Spending

President Barack Obama is seeking to help pay for his health care plan by sharply reducing the government's medical spending, mainly by trimming payments to prescription drugmakers, hospitals and other care providers.

doctor
doctor

His ambitions are thick but the details thin; the president and his aides said specific ways for achieving the cuts will be decided later. The negotiations could trigger fierce political battles between powerful industries trying to protect their profits.

Overhauling the nation's health care system is one of Obama's biggest ambitions, and lawmakers are working on a variety of plans.

A top goal is to reduce costs in the government's largest medical programs, Medicare and Medicaid, which cover millions of elderly and low-income Americans and involve thousands of doctors, hospitals, nursing homes and other institutions.

In his weekly Internet and radio address Saturday, Obama proposed cutting $313 billion from the programs over 10 years. That's in addition to the $635 billion "down payment" in tax increases and spending cuts in the health care system that he announced earlier.

Together, Obama's plans would provide $948 billion over a decade in savings and/or tax increases to help cover the millions of Americans who lack medical insurance and to slow the rate of soaring health care costs.

The status quo is unacceptable, Obama said. "America spends nearly 50 percent more per person on health care than any other country."

The newly proposed $313 billion in savings, he said, "will come from commonsense changes."

He would cut $106 billion from payments that help hospitals treat uninsured people because his plan would cover nearly every American. Payments for Medicare prescription drugs would fall by $75 billion over 10 years.

Barack Obama
AP
Barack Obama

And slowing projected increases in Medicare payments to hospitals and other providers -- but not doctors -- would save $110 billion over 10 years, the president said. His budget director, Peter Orszag, said the reductions are justified because health care delivery is becoming more efficient.

But Orszag and Obama acknowledged that many details remain to be worked out. Obama said simply, "If the drugmakers pay their fair share, we can cut government spending on prescription drugs."

A White House fact sheet said the pharmaceutical industry "has committed itself to helping to control the rate of growth in health care spending. There are a variety of ways to achieve this goal."

For instance, it said, drug reimbursements might be reduced for people who receive both Medicare and Medicaid.

But the pharmaceutical industry is politically powerful. Drugmakers have successfully resisted price controls in the Medicare prescription program so far, arguing that competition is enough to get elderly Americans a good deal.

Other government programs, however, such as Medicaid and the Veterans Affairs health system, may be paying less for many of the same drugs.

Billy Tauzin, president of the Pharmaceutical Research and Manufacturers of America, issued a noncommittal statement.

"We remain committed to working with the administration and Congress to help enact comprehensive health care reform this year," he said. "A lot of work remains to be done, but we will continue to share ideas and seek solutions."

Lobbyists for hospitals, doctors and many other players also have clout in Washington, complicating Obama's mission.

Even if Obama and Congress could hit the overall goal of $948 billion in health care savings over 10 years, it still might not be enough to cover the nearly 50 million uninsured Americans. Outside experts say the 10-year cost could range from $1.2 trillion to $1.8 trillion, depending on factors such as how generous federal subsidies turn out to be. One Senate proposal would subsidize families making as much as $110,000.

The administration wants to hold the cost to about $1 trillion, and Obama says the plan must not add to the federal deficit.

Orszag told reporters that $950 billion "is in the ballpark of many of the proposals floating around," and that "there may well be some additional resources that are necessary."

The administration will work with Congress, he said. But the president's earlier package of $635 billion in spending cuts and tax increases has gotten a cool reception from lawmakers, and there's no indication the latest package will fare any better.

Medical providers from hospitals to doctors to drug makers have agreed with Obama that there's enough waste in the system to cut $2 trillion over 10 years, but behind-the-scenes they are preparing to resist specific cuts.

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