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Obama looks for ways to pay for healthcare

The goal is to make reform deficit neutral, including trims in Medicare and Medicaid.

By Gordon LuboldStaff writer / June 13, 2009

President Barack Obama sits with Democratic Senators Max Baucus and Christopher Dodd during a meeting on health care reform on June 2.

Kevin Lamarque/Reuters

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Washington

President Obama says the White House has identified $313 billion in savings to help pay for the cost of his massive healthcare reform plan.

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He's pledged to make healthcare reform “deficit neutral,” meaning it will not contribute to the escalating federal deficit. But reform will be expensive, and the $635 billion the White House has already identified as a “down payment” to reform the system won’t be enough money to pay the bill.

On Saturday, Obama announced that his administration had identified an additional $313 billion in the form of “commonsense savings” in the Medicaid and Medicare programs over the next decade generated by reforming the system.

“When it comes to the cost of healthcare, this much is clear: the status quo is unsustainable for families, business, and government,” Obama said in his weekly radio address.

The announcement is seen as politically shrewd at a time when the American public and members of Congress have expressed concern about his spending proposals.

It’s a good political move, says Stan Collender, a former congressional budget analyst and now a partner with Qorvis Communications in Washington, because it comes amid greater skepticism that Mr. Obama’s plans can be paid for. “Is it going to pay for everything they want to do with healthcare reform, probably not.”

But the move to look for savings may help pharmaceutical companies, medical providers, and other parties with an interest in reform see that the White House is trying to do its part and they will have to do theirs. Obama has said everyone will have to make cuts, including insurance and drug companies.

If more Americans are insured, payments to hospitals which treat the uninsured can be cut. Drug makers must also pay their fair share, he said, allowing the government to cut spending on prescription drugs. “And if doctors have incentives to provide the best care instead of more care, we can help Americans avoid unnecessary hospital stays, treatments, and tests that drive up costs,” he said.

When the package of savings is added to the $635 billion the White House has already set aside for reform, the total package to pay for healthcare reform is about $950 billion, according to White House officials.

“The president has been very clear that reform must be deficit neutral over the next 10 years and in the final year of that 10-year window,” said Peter Orszag, director of the White House Office of Management and Budget, in a conference call with reporters Friday. “So we are making good on this promise to fully finance healthcare reform over the next decade.”

Despite the economic crisis, Obama has said the country cannot wait to reform healthcare because such costs account for more and more of the nation’s spending, impacting consumers, companies, and government. Healthcare for its employees was one of the biggest costs for General Motors, which is now in bankruptcy.

The administration’s plan to reform healthcare faces challenges from both sides of the political aisle. Republicans oppose any government-run insurance plan. Democrats are wary of cutting Medicaid and Medicare, programs for the poor and elderly.

But, Obama said Saturday, “The unmistakable truth is that it would be irresponsible not to act.”