At the same time, the president proposed giving an extra $1 billion to the federal agency that will implement his landmark reform law.

Obama's $3.8 trillion federal budget proposal for fiscal year 2013 seeks more than $364 billion in savings from lower healthcare spending over the next 10 years, nearly all of it from Medicare and Medicaid, the national government health programs for the elderly and poor, respectively.

Savings would come from a menu of cost-cutting and efficiency measures proposed in September, including Medicare drug rebates, reductions in payments to doctors and hospitals, higher costs for wealthier retirees, a shift in Medicaid costs to states and a continued crackdown on waste and fraud.

"These are significant. But they are carefully crafted to protect beneficiaries," said William Corr, deputy secretary of the Department of Health and Human Services.

The deficit reduction target is $44 billion, or about 14 percent higher than the savings that Obama proposed last year, when the congressional "super committee" searched for a deal to reduce the nation's ballooning debt.

Officials attributed the difference to revamped baseline assumptions and a bigger-than-expected savings dividend from current efforts to rein in waste, fraud and abuse.

The drug industry lobby objected to rebates requirements that would affect Medicare Part D, the program's prescription drug benefit.

The Pharmaceutical Research and Manufacturers of America issued a statement calling the proposal "a short-sighted proposition that could destabilize the program and threaten hundreds of thousands of American jobs."

While seeking deficit reduction from entitlement spending, the new fiscal blueprint would shift more tax dollars to the Centers for Medicare and Medicaid Services, an agency working with states to set up health insurance exchanges meant to extend coverage to an estimated 34 million uninsured Americans under the Patient Protection and Affordable Care Act.

The plan would give the agency a $4.8 billion budget for the fiscal year beginning next October 1, an increase of nearly $1 billion, or 26 percent from this year. About 87 percent of the new money would go to fund state exchanges, which are required to be up and running in January 2014.

But the Obama budget is not expected to win approval in Congress, where Republicans hope to defund the implementation of healthcare reform. HHS still has about half of a $1 billion appropriation from 2010 and expects to spend the funds on exchanges and other reforms this year.

The proposed budget lays out in detail many of the Democratic president's priorities as he seeks re-election in November. For the fourth year in a row, the annual U.S. budget deficit is expected to exceed $1 trillion. The White House projects an easing of the shortfall the following year.

Republicans in the House of Representatives are expected to unveil their own budget plan soon.

Medicare is a hot-button issue for senior citizens who comprise significant voting blocs in important swing states such as Florida, Ohio and Pennsylvania.

Healthcare reform is unpopular with many voters and Republicans have accused the administration of cutting Medicare to finance reforms.

The reform law is being challenged before the U.S. Supreme Court by 26 states and a business group that say a requirement for individuals to purchase insurance is unconstitutional.

Republicans began pouncing on Obama's budget proposal before it was released to the public, saying it would do nothing to avoid a future financial crisis for Medicare.

"The president has failed to offer a single serious idea to save Social Security and is the only president in modern history to cut Medicare benefits for seniors," Republican presidential candidate Mitt Romney said in a statement on Monday.

The White House said its new proposals would extend by two years the solvency of Medicare's Hospital Insurance Trust Fund, which finances hospitalization benefits. Government forecasts released last year said the fund would be exhausted in 2024.

(Reporting by David Morgan; Editing by Doina Chiacu and Michele Gershberg)

• A Permanent Economic Emergency