Following up on themes raised in his first address to Congress, President Barack Obama unveiled a 10-year administration budget that would create a $634 billion health care reserve fund financed by a variety of tax increases and the virtual elimination of the Medicare Advantage program.

 

The $3.6 trillion budget "blueprint" envisions cutting the federal deficit from $1.75 trillion this year to $533 billion in 2013, despite setting aside not only health care reserve fund but an additional $250 billion to further shore up the nation's financial institutions. It would raise $318 billion by capping tax deductions for those in the highest income brackets, and cuts a projected $177 billion by instituting "competitive bidding" procedures in Medicare Advantage, the public-private managed care program created by 2003's Medicare Modernization Act that has served as a source of growth in recent years for many national health insurers.

 

Among other tax provisions, the budget would freeze the estate tax at the 2009 levels of a 45% rate on estates valued at more than $3.5 million for individuals or $7 million for couples. Without any change, the tax is set to see a one-year moratorium in 2010 before the 55% rate and $1 million exemption returns in 2011. The budget also would raise $210 billion by cracking down on offshore tax havens, including potentially taxing related-party reinsurance ceded offshore by U.S. affiliates.

 

Other changes include raising taxes on individuals earning more than $200,000 and capping the tax deductions that can be taken by those in the highest income brackets.

 

The proposal drew immediate criticism from Republican leaders, with House Minority Leader John Boehner, R-Ohio, arguing that while "everyone agrees that Americans ought to have access to affordable health insurance, but increasing taxes in the middle of an economic recession, especially on small businesses, is not the way to accomplish that goal."

 

"They put all this money in the stimulus bill so that they could do comparative analysis. A way of government bureaucrats looking at treatments that patients get and trying to determine which ones are more effective than others," Boehner said. "In other words, getting ready to tell doctors and patients that this is the cure regardless of what the doctor may think."

 

Karen Ignagni, president and chief executive officer of America's Health Insurance Plans, said the industry welcomed many of Obama's recent initiatives -- including comparative effectiveness -- and already has "offered a comprehensive proposal that starts with us playing a leadership role in advocating for market reforms and addresses the core issues of cost, access, and quality."

 

However, AHIP defended the performance of its members in the Medicare Advantage, with Ignagni noting they provide "care coordination, disease management, and prevention programs for seniors and reward clinicians for delivering quality care to patients."

 

"Unfortunately, this proposal would force seniors enrolled in Medicare Advantage to fund a disproportionate share of the costs to reform the health care system," Ignagni said. "A cut of this scale would jeopardize the health security of more than 10 million seniors enrolled in Medicare Advantage and would turn back the clock on innovative payment incentives to improve the quality of care that patients receive."

 

Cori Uccello, senior health fellow with the American Academy of Actuaries, noted national health spending is projected to nearly double by 2018, reaching $4.4 trillion and consuming 20.3% of gross domestic product, and said the reserve fund "confirms (Obama's) commitment to these issues."

 

"There is no single solution. Viable options will likely require a shared burden among taxpayers, Medicare beneficiaries, and the health care industry," Uccello said