The budget, which faces long — if not impossible odds — of getting through Congress in its current form, also seeks to slash spending on Medicare.
The Trump budget calls for cutting $237 billion to Medicare, the huge federally run program that provides health coverage to primarily older Americans. When he ran for office, Trump told voters that he would not cut Medicare or Medicaid.
Trump, since being sworn in as president last year, has repeatedly tried and failed to get the Republican-controlled Congress to repeal the Affordable Care Act, as Obamacare is formally known.
His new budget proposal invokes the ghost of one of those doomed repeal bills, calling for "a two-step approach to repealing and replacing Obamacare, starting with the enactment of legislation modeled closely after the Graham-Cassidy-Heller-Johnson bill, as soon as possible," according to a summary released by the U.S. Health and Human Services Department.
Under that proposal, tax credits that help most Obamacare customers purchase health insurance coverage would be eliminated.
In their place, the federal government would give states health-care grants that the states then would have the option of using to subsidize the purchase of insurance by customers on the individual insurance market.
In another echo of Graham-Cassidy, the new budget proposal also would seek a rollback of Obamacare's expansion of Medicaid benefits to poor adults. Medicaid offers health coverage to primarily low-income people. Before Obamacare, most states either denied Medicaid coverage to people who did not have dependent children or set very low limits on how much a person could earn and still qualify for coverage.
HHS said that the Obamacare repeal provisions contained in the budget would save almost $680 billion over the next decade. While those savings might look attractive, some other costs associated with Graham-Cassidy could doom Trump's latest effort to kill Obamacare.
A vote on Graham-Cassidy was canceled last September after it became clear that Republicans, who hold a slim majority in the Senate, would not get "yes" votes from several GOP members.
The last Republican to come out against the bill, Sen. Susan Collins of Maine, did so right after the Congressional Budget Office said the number of people with health insurance that covers "high-cost medical events would be reduced by millions" if the bill became law.
Collins, in announcing her opposition, said the bill would have opened the door to states rolling back Obamacare protections for people with pre-existing health conditions, who before the ACA became law could be charged higher insurance premiums than healthy people.
The CBO earlier had said that repealing Obamacare could lead to 20 million or more Americans becoming uninsured.
Brad Woodhouse, director of the Obamacare advocacy group Protect Our Care Campaign, said the Trump administration's budget "is doubling down on its relentless war on American health care."
"By asking Congress to revive the deeply unpopular Graham-Cassidy repeal bill that ended protections for Americans with pre-existing conditions, gutted Medicaid, ripped away coverage from millions, and raised costs for millions more, while also proposing drastic cuts to Medicare," Woodhouse said.