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Originally published Wednesday, April 10, 2013 at 10:22 AM

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Budget: cover uninsured, trim Medicare, tax cigs

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.

Associated Press

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WASHINGTON —

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 of any new 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 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 nearly $950 billion, roughly one-fourth of all federal spending. Aging baby boomers swelling the Medicare rolls and coverage for 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, a bid to draw Republicans into negotiations to reduce government debt. It amounted to single-digit percentage points trimmed from Medicare spending, but for seniors individually and for businesses like hospitals and drug companies, there could be substantial consequences.

Obama has previously offered most of the Medicare cuts, but failed to gain political traction. Some 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, 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 take the biggest hit, more than $130 billion over 10 years, through rebates and discounts that include a new proposal to speed the closure of Medicare's prescription drug coverage gap.

Spending on Medicaid, the program for low-income and severely disabled people, would rise $37 billion next year, mostly the result of the coverage expansion in Obama's health care law. Medicaid is expected to account for about half the nearly 30 million uninsured people eventually covered through the Affordable Care Act.

In a gesture to states debating whether to accept the law's Medicaid expansion, the new budget calls for a one-year delay in certain cuts already scheduled that would affect hospitals with a large share of uninsured and low-income patients.

But overall the costs of the new health care law were hard to tease out, mixed together with other program spending in a budgetary stew. Some of the 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 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. Many think that could deter young people from smoking.

"Raising the price of tobacco is the single most effective way to keep kids from smoking," said Dr. Tom Frieden, director of the Centers for Disease Control and Prevention. "It will protect kids. It will save lives. It will save money."

Beyond the question of paying for health care, Obama's budget also takes aim at the growing threat of infectious diseases. A new $40 million program would help CDC's disease detectives nab germs on the brink of an outbreak, particularly drug resistant ones.

New technology called advanced molecular detection would combine supercomputers with a faster ability to decode the DNA of suspect germs - cutting that process to hours instead of days, said Frieden.

The CDC is just beginning some of this work, rapidly spotting important genetic changes in the bird flu now striking China, for example. But Frieden called more work crucial: "If we don't do this, it's going to mean that the microbes are getting the upper hand."

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AP Medical Writer Lauran Neergaard contributed to this report.

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