Obama Plan Cuts Health Care, Raises Some Taxes

President Obama introduced a plan on Wednesday to reduce the deficit, but at the same time protects programs including Medicare, Medicaid and Social Security. White House budget director Jack Lew tells Steve Inskeep that Obama's plan has nearly $500 billion in savings in the health programs over the next 12 years.

STEVE INSKEEP, host:

The president's plan preserves more federal programs in part by increasing higher taxes for the wealthy. The man overseeing the proposal is Jack Lew, the president's budget director, who met us yesterday at his office near the White House.

INSKEEP: I want to list some of the things that the president said he wanted to preserve: Medicare, Medicaid, Social Security, medical research, clean energy, new roads, new airports, broadband access, education and job training, among other things. Are you really making hard choices with this budget?

Mr. JACK LEW (White House Budget Director): Absolutely. The plan that the president laid out protects Medicare but it has significant savings in Medicare reimbursements. It has significant savings in the Medicaid program. Overall, there's almost $500 billion of savings in the health programs over the next 12 years. These are very tough policies, but they reflect a balance. They reflect the fact that we need to run the programs more effectively and not just shift the burden of risk to the beneficiaries.

INSKEEP: That's one of the biggest items of savings maybe the biggest -having to do with Medicare, hundreds of billions of dollars. Yet you're still committing to preserve that entitlement. Do you really know how to save that much more than you've already committed to try to save?

Mr. LEW: Yes, we do. And I think that it's important to think about what the country was like before we had a Medicare program. Before we had a Medicare program, old people didn't have health insurance. So it was not created because there was a private market that was working. It was created because old people didn't have healthcare. Just like before Social Security, old people were poor.

We do need to make savings. We have to make changes - and they're going to be tough. We've made a lot of savings. In the Affordable Care Act, we saved over the next decade hundreds of billions of dollars; the decade after that a trillion dollars. So this is building on the savings we've made. And most importantly, bending the cost curve - that means lowering the cost of health care in this country.

INSKEEP: But with respect, there were some doubt, some question among experts, whether you could get all the savings you've committed to in the healthcare law that was passed last year. And now you are committing to even more savings over the next dozen years in order to help reduce the deficit. Do you know how to do that?

Mr. LEW: Yeah, I think we do. And I actually think since the healthcare law passed, there's been a fairly broad embrace of the mechanism that would bring expert advice to bear so that we have information to inform both reimbursements and care so that we have better outcomes and more efficient care.

I think we do know how to do it. It takes time. It's not something you can do in a year or two. And by setting the bar a little bit lower, you know, by making it so that these cost constraints hit a little bit earlier, we can make real savings by changing the way we reimburse pharmaceuticals, the way we reimburse various levels of government. We can make significant savings.

INSKEEP: You've got a panel of experts in the law that is supposed to save a lot of money, basically impose savings on the healthcare system. It doesn't have the most sweeping powers that it might because it was much criticized last year and there was a lot of concern about it. You're going to give it more power now?

Mr. LEW: Well, I think that budgets force choices, and in making policy those choices say a lot about your values. We're a great country that doesn't have to say we're going to put the risk of costs going up on those who are least able to bear it; that we as a country have to make the tough decisions, and it may mean standing up to some interests that don't like to have constraints put on them - and that's tough. It's tough in Washington and I will accept the argument that it is hard to do.

It's also hard to tell old people that they can't afford healthcare. We're saying that's a choice.

INSKEEP: How hard is the president determined to fight for tax policy changes that will be characterized and in fact are already being characterized as tax increases?

Mr. LEW: You know, I think he said very clearly that we should increase taxes on certain people, himself included. If the choice is whether people who are earning millions of dollars a year should be spared from paying taxes at a rate that was the rate that prevailed when we had the longest period of economic growth in our country's history versus cutting old people off from health insurance or not building the infrastructure we need for the next generation or not educating the next generation, that's the kind of choices that a great country should make, you know, and we think it should be made in favor of raising taxes where it's appropriate.

And it's not raising taxes to a level that would be punitive. He was very careful in his speech to make it clear that he's not saying that the people who are in those income brackets are doing anything wrong. In fact, what he said in the speech was he's not hearing that many complaints from the people in those income brackets. It's the political process that can't get its hands around this problem.

INSKEEP: Jack Lew is the White House budget director. Thanks very much.

Mr. LEW: Thank you.

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