And he is proposing new systems intended to encourage better and more cost-effective care, in part by reducing government reimbursements to hospitals with high readmission rates.
Obama's cost-cutting plans risk substantial opposition from industries that count on the federal government to pay their bills.
On Wednesday, the proposal was received warily by health insurers, who said changes in Medicare would hurt seniors.
"This proposal asks seniors to pay a disproportionate share of the cost of healthcare reform," said Robert Zirkelbach, a spokesman for America's Health Insurance Plans, the industry's Washington-based lobbying arm.
Chip Kahn, who heads the Federation of American Hospitals, said he would review the potential effects of the president's plans.
"The devil really is in the details," said Kahn, expressing hopes that hospitals would be able to work with lawmakers on the incentive system contemplated by the administration.
A spokesman for the Pharmaceutical Research and Manufacturers of America was equally cautious.
On Capitol Hill, Republicans are almost certain to oppose the tax hikes proposed by Obama.
"Everyone agrees that all Americans deserve access to affordable healthcare, but is increasing taxes during an economic recession . . . the right way to accomplish that goal?" asked House Minority Leader John A. Boehner (R-Ohio).
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noam.levey@latimes.com
Peter Nicholas in our Washington bureau contributed to this report.
