February 25th, 2009
10:31 PM ET

Pres. Obama seeks tax hike, higher medicare premiums to pay for health plan

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By Ed Henry
CNN Senior White House Correspondent

President Obama will ask wealthy Americans to deal with a tax increase and pay higher Medicare premiums to help fund a $634 billion health care "reserve fund" aimed at reforming the system, according to senior administration officials familiar with the budget being unveiled Tuesday.

The reserve fund will essentially be a piggy bank to be used only for reforming the system by cutting costs and trying to deal with the 46 million people currently without health insurance. The budget will leave the actual details of how to reform the system to be worked out by Congress, and top Obama officials are already acknowledging this is only a start - it will take more money to get the job done.

"This is a substantial down payment for health care reform," one senior administration official said of the President's plan.

In order to raise $8.1 billion for the health care fund, the President is going to ask 1.5 million wealthy senior citizens to dig deeper into their pockets to pay more for their own prescription drugs starting in 2011, according to officials.

This affects seniors earning over $170,000 a year who already pay more for Medicare "Part B," which covers doctors' visits, and will now be asked to pony up more for Medicare "Part D," which covers the prescription drug program created by former President Bush.

In order to raise a whopping $318 billion for the health care fund, the administration will raise the tax liability of wealthy Americans earning at least $250,000 a year by limiting how much they can write off for itemized deductions like mortgage insurance and charitable contributions.

Top Obama officials use the example of billionaire Bill Gates to make their point, noting that if he wanted to deduct $10,000 in mortgage interest, at a tax rate of 35 percent he would currently get a tax break of $3,500. Under the Obama plan, Gates would only get to write off 28 percent, thus getting a tax deduction of just $2,800.


The administration projects it will raise another $176.6 billion over 10 years for the health care fund by adding efficiencies to the Medicare and Medicaid programs.

Knowing full well that Republicans will use a familiar charge by claiming this is a “tax-and-spend” budget, Obama officials are pushing back by noting they are just raising taxes for the top five percent of Americans while 95 percent of Americans got a tax cut with the recent stimulus plan.

Obama officials add that they inherited an annual budget deficit of about $1.3 trillion and need to find a way to raise revenue to invest in the future. “We were left with an unsustainable fiscal course,” said one top official.

Filed under: Economy • President Barack Obama • Raw Politics
soundoff (26 Responses)
  1. joe

    I work 16 hours a day in my business and will be affected by the increase. Guess how I intend to deal with the increase? I will raise the prices to my poor and middle class customers.
    Guess how company executives will handle the increase? They will increase their salaries, bonus, and stock options to cover the increase in tax. To cover the increase, the company will increase the cost of their products or services.
    this package should be called the 'inflation bill' not the 'stimulus bill'.
    I pity the retired people living on a fixed income.

    February 27, 2009 at 1:04 pm |
  2. Silvester Muller

    National health care can be provided through a separate flat rate tax based on a percentage of your income.The federal government would pay the health care providers. This system would replace the current entitlement programs which are tax payer funded. It would replace the current employer and employee co- pay health care insurance system. The Federal Government and the A.M.A. should determine set prices for medical proceedures, hospital stays and prescription drugs ete. These services should not exceed the costs of their European or Canadian counter parts. Having served in the U.S. Army from 1967 – 70. I saw a form of universal health care that could be used as a blue print for national health care today.

    February 26, 2009 at 1:27 pm |
  3. christopher reid


    February 26, 2009 at 9:32 am |
  4. Daniel C.

    Making the deduction rate (28%) different than the marginal rate (35%) is blatantly unjust, since you're effectively taxing people for non-taxable items.

    The Obama administration makes a specious argument that its unfair for a rich person to get a "bigger tax break" for the same deduction. If it's deductible, then your taxable income is smaller, and your reduction should be at your marginal rate. Otherwise, you're effectively paying more than the correct rate for your adjusted income. So you're basically getting taxed on your charitable contributions, healthcare, and other things that on principle should not be taxable.

    If the Obama government want to extract wealth from the upper class, at least do the honest thing and raise the marginal rate, instead of taxing people's genuinely deductible expenses.

    February 26, 2009 at 9:07 am |
  5. Michael C. McHugh

    It's a good idea to have a reserve fund for medical care, just as it is to have a Social Security Trust Fund. Naturally, I hope we can pass some legislation that will prevent anyone taking all the money out of these funds and replacing it with IOUs. I don't know how much longer we can go on robbing Peter to pay Paul.

    I also think that ultimately, only a direct cash transfer from the Federal Reserve system will enable us to get over this huge hurdle of Baby Boomer retirement. Maybe we should just make these trust funds an extension of the Federal reserve, rather than part of the general budget. Just continue depositing the payroll taxes right into them.

    February 26, 2009 at 9:05 am |
  6. Simonsays

    The spending will never stop. And increasing taxes on only on people making more than $250,000 is a joke. Everybody's going to have to pay for this eventually.

    February 26, 2009 at 8:47 am |
  7. Ric Perry

    It appears that every time a tax increase for health is suggested, individual states take it upon themselves to hike up the tax on cigarette sales.
    When one gathers all the statistics on health issues throughout the entire U.S. the numbers are lopsided. It appears that cigarette health issues fall far behind issues such as child obesity, diabetes, depression and the list goes on.
    How about the government starts taxing the fast food, snack and soda industries. It would only be right that the folks who indulge theirselves in manners which cause these health issues, pay for them instead of relying on the smoker.
    Maybe now, congress can smoke this.

    February 26, 2009 at 8:30 am |
  8. sandra

    I can't believe the way Obama was applauded the other night. The americans should realise that their is a time for applause and a time for a serious entry. Incredible. These are serious times.

    February 26, 2009 at 7:31 am |
  9. J.V.Hodgson

    C'mon guys face reality.
    Sick people cost us all $bn in lost work.
    The cost of medications in the US is a disgrace people are already buying medications at 1/10th the cost you pay in the USA thru the internet as opposed to medicare supported routes.
    Even if you have medical insurance, there is an army of staffers figuring out ways to deny claims beacause of pre-conditions. The whole idea of of insurance (philosophy originally) was you could insure against anything including the sun Rising tomorrow, if you paid the premium.
    Doctors in America can even ignore the hypocratic oath..sarcastically god bless them, they do not do it directly, but by unrealistic rules to admissions staff.
    Compared to all the other western civilised nations your current system is broken unless you have ooodles of cash, and you pontificate to the world about human rights!?
    I do not care where it is but 2% of the population anywhere any country owning 90% of any nations wealth is abhorrent when anyone at the drop of a hat cannot get medical treatment any time.
    Go Obama set aside the $600bn and take the best of other global systems to fix the problem. Those who can pay can pay for a super service can still have private cover with all its pre conditions stupidity!!

    February 26, 2009 at 5:06 am |
  10. B. R. HODGE

    I do not have a great political mind and that does not burden me that much. My family and our livelihood is first and foremost here, but I read all I can concerning current events and have all my life. I have never and will never agree with our leaders one hundred percent of the time and would expect to be treated the same if I were a public figure. Carter was my first experience with a president that I had very little confidence in and now I have the same feeling with Obama. All presidents in my lifetime have done something that I thought was wrong for the people and or the United States, but I would gripe about it to my co-workers or whoever else would listen and go on about my business and hope for the best. Obama is the first president to kick my work ethics in the balls though,to constantly punish the hard working people who have worked 7 days a week, night and day, whatever it took to make their business a success, to offer a service or a product for all, to make a profit, hopefully to enjoy the fruit of their labors in the years when they could not work as hard or as long as they used to and now be told they have to pay more to support government programs to help those who have less. When did that become a sin, to be successful? That's what my generation was taught, it 's how we lived. Hard work is it's own best reward. Has my generation been wrong all these years? Why do we now have a thief as a president? He's even stealing the future from all our children and no one not even you in the news business criticize this president when he's wrong. Did you news types just quit giving a damn about right and wrong. Do you search your soul when you write your stories?
    Who among you will stand up and speak up and be the voice of our conscience? We have no one to blame but ourselves, we all had a hand in this, you as much as me. I fear this change and you will too.
    This president is beginning the end for us and the future.

    February 26, 2009 at 4:26 am |
  11. Aamadu Deh

    my name is Amadou Deh from Senegal west Africa
    everry single day, I,m volantery in my nation fullani, i never lose Obama speech, it's help me lot, becausse we are standing for united peopol in Africa, thanks Anderson Cooper

    sorry my i don't speak english verru well.

    February 26, 2009 at 2:45 am |
  12. Alex (Aliso Viejo)

    If I were to be honest myself, I would say that I was taken aback by the healthcare plan's urgency. I do agree we need to reform healthcare ASAP because it is our largest liability and we are bleeding money from it. However, I believe the American people are getting uneasy with the amount of money being spent as we are currently in recession. Uncertainty still looms specially with the stimulus package not being implemented just yet and no impact has been resulted. Solving this recession must remain as our biggest concern. Other key factors remains is overshadowed by our economic crisis. My only question is "where would the money come from?".

    February 26, 2009 at 2:33 am |
  13. Gerald fonenot

    NOT A GOOD IDEA!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!

    February 26, 2009 at 12:46 am |
  14. Brandon from Ft. Worth

    Its about time somebody tries to attack the idea of health care for Americans. In this country you cannot get sick unless you have money. In England, Canada, and Amesterdam people dont even pay for health care. How does that make are country the best in the world

    February 26, 2009 at 12:45 am |
  15. Jessica

    I have a unique perspectvie on the topic of health care, I am nursing student but I myself have a chronic health problem in which my medical bills cost per year almost the same amount as my tuition. I think reforming the health care system in the US is the key to helping the economy. In his plan the president will have people who can afford to loose a few thousand dollars, put it into a fund that will ultimatly reduce their health care costs in the long run and help other americans in the process, it doesn't seem like it should be a debate.

    February 26, 2009 at 12:15 am |
  16. Kim

    Universial Health Care is on go ! That's great and very important ! Obama's in NC this week and hope someone asks why NC doesn't get all their stimulus package money. That money creates,"Jobs Baby Jobs." Crack open those piggy banks and shake it,don't break it !

    February 26, 2009 at 12:12 am |
  17. Robbie C Newman

    I would like to speak for the seniors We do not think that we should have to pay income tax on our checks we worked all of our lives and pay income tax and pay again when we retire .

    We seem to be forgotten and end up with very little,poor health care,cannot pay for medications and some has to give up medications for food get sick and die from the lack of health care.

    We seniors need a bail out as well don,t throw away your seniors because we can no longer work We are your mothers,fathers and grand parent . Robbie C Newman

    February 25, 2009 at 11:51 pm |
  18. Steve Bell

    I would like to hear about our foreign aid programs. Have we cut back? Or are we still sending billions to other countries? This time, we may need to think about ourselves first, and then resume foreign aid when we can better afford it.

    February 25, 2009 at 11:44 pm |
  19. Allen in PA

    Isn't it nice that congress wants to limit health care for the average American and raise there cost for average Americans coverage while congress has a golden plan that covers everything and is paid for by tax payers. Tax payers are fools.

    February 25, 2009 at 11:17 pm |
  20. DavidinHelena

    Great moves for being fiscally responsible and paying for health care. Thanks for this Health Care reform and Budget coverage. PLEASE, Please cover the issue of universal health care and taking the high overhead costs out of our national health care.

    Too Bad for Ali Velshi on tonight's show. I think "Wonk" would be a compliment for him. Glad to see you got him to take his left hand out of his pocket. He's our textbook example of a nerdy metrosexual (we have no good examples of this in Montana). Anderson should try that one out on Ali...

    We all love David Gergen (sage) and Erica Hill (cute and smart).

    February 25, 2009 at 11:15 pm |
  21. david

    You guys are morons – there are not 50m uninsured folks – and even if we say there are 40m, remember half of them are people that can afford health insurance BUT CHOOSE NOT TO GET IT – these are generally healthy, young risk takers. In addition, to use Bill Gates as the example for how the mortgage deductibility is going away is so biased. Why not use a regular person – oh, because it is easy to be for socking it to Bill Gates, but not John Q Public. Waxman, Clinton, Obama are doing a power grab to control prices and your doctor how to treat you.

    February 25, 2009 at 11:12 pm |
  22. Rose from NY

    President Obama is about to alienate everyone in this country. His plan to go after the wealthy to fill every need of his exorbitant spending plan is just plain wrong. He has made the wealthy the enemy while raiding their piggybanks.

    Most Americans aspire to make a decent living. It is part of what made this country great. Those who strove to succeed, worked hard and realized their dreams are being penalized. Not all wealthy are unscrupulous CEO's who screwed over the little guy.

    What is the motivation to now succeed? His plans will only encourage mediocrity. Don't you dare do better than anyone else....or we will make you pay.

    February 25, 2009 at 11:12 pm |
  23. Michelle

    I love how it says that the President is going to "ask" wealthy senior citizens to pay more than everyone else. So umm... what did the wealthy senior citizens say?

    February 25, 2009 at 11:07 pm |
  24. fred gee

    I voted for Obama but now deeply regret it. I have had the wool pulled over my eyes. Those that said he was too liberal and part of the far left were unfortunately correct. He is pushing a socialist agenda that will lead to the demise of this country, which is founded on freedom, entrepreneurship, and opportunity. Those who support the economy(i.e., small business owners and professionals like doctors and engineers) will have no incentive for hardwork as more than 50% of their income will go to the government. I am all for altruism but unfortunately, when government tries to do things, it is woefully inefficient and fraught with corruption. I hope the country "wakes up" from Obamania in time for Republicans to regain seats in the Congress and, at least to some extent, mitigate the damage that the far left is wreaking on the country.

    February 25, 2009 at 11:00 pm |
  25. robyncaffrey keyser westvirginia

    att :anderson

    when i first seen this topic ( i almost droped )
    as the only income coming in my house now is my husbands ssdi
    and we are so lucky if we have $95.00 left for food. cant wait for the food stamp's.

    yes we can"

    February 25, 2009 at 11:00 pm |
  26. Luis

    CNN can you please talk to David Walker, Former Comptroller General of the U.S. Accountability Office.

    We cant afford the current social security and medicare and medicaid. Please do some real research around here this is pathetic.

    I know more than your journalist who sit in front of a computer all day at the local coffee store, writing about the next socialism revolution.

    February 25, 2009 at 10:38 pm |