Obama's budget sidesteps dramatic health reforms

A monitor in the control room is seen in a hospital in a file photo.

WASHINGTON (Reuters) - The Obama administration's latest spending plan calls for modest changes to the U.S. healthcare system but does little to incorporate sweeping moves called for Democrats' larger plan to increase access and cuts costs.

In releasing his fiscal 2011 budget on Monday, President Barack Obama said his proposal "includes funds to lay the groundwork for these reforms." Instead of dramatic action, the plan seeks to boost health information technology, cheaper generic drugs and certain Medicare payment changes.

The budget plan comes as efforts to pass sweeping healthcare reforms in Congress have stalled with little sign from Democratic leaders on when final legislation will move forward.

"This budget -- absent health reform -- will still leave a major gap in not only affordable coverage for many, many Americans, but makes very little change in the cost trajectory, which right now is just crushing families," as well as businesses and government, Department of Health and Human Services Secretary Kathleen Sebelius said. "We need both."

Reforming the nation's swelling $2.5 trillion healthcare system has been a top priority for Democrats in the last year, but talk of imminent change has quickly faded amid rising anxiety about the U.S. economy and the stinging loss of a Senate seat that cost Democrats the supermajority needed to break procedural hurdles in the chamber.

Democrats in the House of Representatives and the Senate have passed different versions of legislation that aims to expand access to health insurance for millions more Americans, but have so far been unable to agree on a final bill.

Obama and other Democratic leaders have vowed to press ahead but have faced gridlock after Republicans won a crucial Senate seat in Massachusetts long held by Democrats and as public concern rose about unemployment levels.

HEALTH SAVINGS

Administration budget officials, speaking on background, said while the health budget does not include specific health reform spending, it overall includes $150 billion in anticipated net savings over 10 years from the overhaul.

Senate Finance Committee Chairman Max Baucus, who helped shepherd a health reform bill through the Senate and whose committee oversees the massive Medicare and Medicaid government insurance programs, said he was "pleased to see that health reform is assumed to be part of" the budget.

Some Wall Street analysts also said Obama's plan appears to reflect the budget impacts of Congress' healthcare bills. Shares of healthcare insurance companies -- the biggest target of Democrats' reforms -- closed lower than the overall market.

The S&P Managed Health Care index of large health insurers closed nearly unchanged while the overall S&P index closed up 1.4 percent.

Specifically, Obama's plan seeks to reduce health costs through cheaper, generic medicines as well as limited steps to reform payments under the massive Medicare insurance program.

It also expands efforts to compare medical treatments to help doctors determine which therapies work best by another $286 million. Health insurers back such research, but drug and device makers worry it could be used to deny coverage for newer, more costly treatments.

Additionally, the plan seeks $110 million to boost health information technology such as electronic medical records.

Congress must still weigh Obama's plan before drafting its final spending plan for the next budget year starting October 1.

The White House has said reform must pass to shore up the nation's long-term finances. But analyst Ethan Siegal of The Washington Exchange said the budget shed little light on the future of the administration's health reform bid "except their hope."

(Reporting by Susan Heavey, additional reporting by Lewis Krauskopf in New York; editing by Vicki Allen and Cynthia Osterman)