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Wednesday, Apr 10, 2013 5:30 PM UTC

Budget: cover uninsured, trim Medicare, tax cigs

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Topics: From the Wires, ,

WASHINGTON (AP) — President Barack Obama’s new budget offers Medicare cuts to entice Republicans into tax negotiations, while plowing ahead to cover the uninsured next year under the health care law the GOP has bitterly fought to repeal.

But the biggest health consequences from any proposal in Obama’s plan could come from nearly doubling the federal tobacco tax. If enacted by Congress, it could make young people think twice about picking up the cigarette habit.

Unveiled Wednesday in a flurry of numbers and details, the health care provisions of the 2014 spending plan will touch every American family, and businesses large small throughout the economy.

The budget for the Health and Human Services department would rise 5.4 percent to more than $949 billion, roughly one-fourth of all federal spending. An aging population swelling the Medicare rolls and the expansion of coverage to the uninsured under Obama’s signature law keep pushing health care spending higher.

On Medicare, the president sought to tap the fiscal brakes. His plan offered about $400 billion over 10 years in cuts, part of a bid to draw Republicans into negotiations to reduce government debt. Against long run trends, it amounted to single-digit percentage points trimmed from Medicare, but for seniors individually and for businesses like hospitals and drug companies, the consequences could be substantial.

Obama offered most of the Medicare cuts before, but failed to gain political traction. Some of the proposals — such as hiking premiums for upper-income beneficiaries — clearly enjoy Republican support. But it’s uncertain how far Obama can get. The president has said he won’t ask beneficiaries to pay more without tax hikes on upper-income earners that Republicans are loathe to concede.

Powerful advocacy groups like AARP, along with most congressional Democrats, are dead set against cutting Medicare benefits.

Upper-middle class and well-to-do seniors would pay higher monthly premiums for outpatient and prescription drug coverage, in a significant expansion of a policy already in effect. The current premiums would be boosted, and the share of beneficiaries exposed to the higher rates would keep growing until it reaches one-fourth of all those in the program. Now, only about 6 percent of Medicare recipients pay higher “income related” premiums.

Newly joining Medicare beneficiaries would face several charges that will not apply to established retirees. These include a $100 copayment for home health services not preceded by an in-patient stay.

But most of the Medicare cuts would fall on service providers such as hospitals and nursing homes. Drug companies would bear the biggest hit, more than $130 billion over 10 years, through rebates and discounts that include a new proposal for speeding the closure of Medicare’s prescription drug coverage gap.

Spending on Medicaid, the program for low-income and severely disabled people, would rise significantly as the coverage expansion in Obama’s health care law goes into full effect next year. Medicaid is expected to account for about half the nearly 30 million uninsured people eventually gaining coverage through the Affordable Care Act.

The costs of the coverage expansion were hard to tease out of the budget, in large part because they’ve been lumped together with other program spending in what’s called the “baseline.” Some of money doesn’t even appear in the HHS budget.

For example, a footnote in another section of the budget noted that tax credits to help uninsured middle-class Americans buy private coverage would total about $32 billion next year. Subsidized coverage for middle-class people who don’t have access to job-based insurance is the other major prong of Obama’s health care law.

The proposed tobacco tax increase isn’t likely to generate as much political heat as Medicare cuts or so-called “Obamacare,” but it could have a huge effect on public health. About one in five adults is a smoker, a rate that seems stuck despite ceaseless anti-tobacco campaigns. Obama would nearly double the federal tax on cigarettes to $1.95 per back. And many think that could deter young people from smoking.

“Young smokers are incredibly price sensitive,” HHS Secretary Kathleen Sebelius said earlier in the week.

More Ricardo Alonso-zaldivar.

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