The FY 2010 budget proposal is available at www.whitehouse.gov/omb/budget

President Barack Obama has made health care a top priority in his first budget proposal by setting aside $634 billion over the next decade to begin reforming the health care system and expanding health care coverage to all Americans.

The proposed “reserve fund” for health care would get half of its funding from new revenue and half from savings proposals. For example, the Obama administration wants to introduce a competitive bidding process to the Medicare Advantage program, a move estimated to save more than $175 billion over 10 years.

However, in its budget proposal, the administration acknowledged that even $634 billion would not be enough to fully fund a comprehensive reform of the health care system and that administration officials would need to work with Congress to find even more money.

President Obama delivered the 140-page outline of his fiscal year 2010 budget proposal to Congress on Feb. 26; complete documents will be submitted to Congress in April.

“With this budget we are making an historic commitment to comprehensive health care reform,” President Obama said. “It's a step that will not only make families healthier and companies more competitive, but over the long term, it will also help us bring down our deficit.”

The budget proposal contains a set of eight principles the president plans to use to guide his health reform efforts: reducing premiums and other costs for American families and businesses, reducing costs from unnecessary tests and services, putting the nation on a path to universal health care coverage, providing portability to health care insurance, providing individuals with a choice of health plans and physicians, investing in prevention and wellness; improving patient safety and quality of care, and ensuring the long-term fiscal sustainability of the system.

Key among the reforms identified by the Obama administration is the need to change the Medicare physician payment formula. The president supports “comprehensive, but fiscally responsible” changes to the current payment system, according to the budget proposal. “The Administration believes Medicare and the country need to move toward a system in which doctors face better incentives for high-quality care rather than simply more care.”

The budget proposal also contains good news for physicians who have been bracing for a deep Medicare pay cut next January. In what the administration calls a “return to honest budgeting,” the FY 2010 budget proposal will account for the fact that payments to physicians under Medicare will not be significantly cut as called for under current law.

The American Medical Association applauded the administration's willingness to address Medicare physician payment issues. “President Obama's budget proposal takes a huge step forward to ensure that physicians can care for seniors by rejecting planned Medicare physician payment cuts of 40% over the next decade,” AMA president Nancy H. Nielsen said in a statement. “Looming widespread physician shortages coupled with aging baby boomers highlight the urgent need for permanent Medicare physician payment system reform to preserve seniors' access to health care.”

The investment in health reform was praised by health care advocates. Ron Pollack, executive director of Families USA, a national organization for health care consumers, said the FY 2010 budget proposal bodes well for achieving health care reform this year. It “is a critical first step towards two related and important objectives—bending the health care cost growth curve and ensuring that everyone has access to high-quality, affordable health coverage and care,” he said in a statement.

America's Health Insurance Plans also praised the president's commitment to health reform. However, the group criticized the proposal to make Medicare Advantage plans engage in a competitive bidding process, saying that significant cuts to Medicare Advantage would “jeopardize the health security of more than 10 million seniors” enrolled in the program and reverse payment incentives designed to improve quality of care.

The FY 2010 budget proposal also includes $76.8 billion in discretionary funding for the Health and Human Services department. At press time, Congress was still finishing up work on the FY 2009 budget for the HHS.

The FY 2010 budget proposal for the HHS includes more than $6 billion in cancer research funding at the National Institutes of Health, on top of the $10 billion in NIH funding that was included as part of the American Recovery and Reinvestment Act, enacted earlier this month.

The administration's budget proposal also aims to address physician shortages by spending $330 million to expand loan repayment programs for physicians, nurses, and dentists who agree to practice in medically underserved areas.

Finally, the proposal aims to reduce drug prices by accelerating access to generic versions of biologic drugs.

Budget Sets Aside $634 Billion for Health Reform