The White House just released a letter from President Obama to Senators Max Baucus and Ted Kennedy. The letter is a follow-up to Tuesday's meeting at the White House and covers a lot of the same ground that Obama's prepared remarks did. But it also has a few new, and important wrinkles.

The most important, I think, is some new money on the table. In his budget, Obama set aside a little over $600 billion in a health care reserve fund, in order to finance expanded insurance coverage over the next ten years. But, as he noted at the time, offering subisdies to everybody who will need them--and bolstering programs, like Medicaid, for the poor--would take a lot more money.

Now Obama is putting another $200 to $300 billion on the table. He's proposing to extract that money from savings in Medicare and Medicaid, beyond those already proposed.

Similar proposals came up in the administration's early budget discussions; I'm not sure if this is, in effect, the same idea. But, critcialy, he's pairing this offer with a proposal he outlined yesterday--empowering the Medicare Payment Advisory Commission to make more decisions over reimbursement.

The idea is to reduce spending on unnecessary treatments (and unnecessarily high prices) in areas where these programs spend too much. This is, or is supposed to be, different than a routine cut in the programs' funding--although critics will call it a cut anyway.

If you add the dollars in Obama's original budget proposal to the dollars in Medicare/Medicaid savings and throw in some new revenue--which, in this letter, Obama says he'd support--then you're in the neighborhood of what you need to finance universal coverage. And, it's worth noting, key congressional figures were already hoping to extract similar savings from Medicare/Medicaid, so the idea has real legs.

Of course, Congress has balked at part of Obama's original proposal--specifically, the cap on deductability for charitable contributions. Obama, in turn, isn't rushing to embrace the most likely source of new revenue--capping or otherwise limiting the tax exclusion for employer health benefits.

(Indeed, the administration seems rather annoyed that Baucus indicated otherwise on Tuesday, in comments to reporters outside the White House--although, to be perfectly honest, I've lost the ability to discern when such shows of displeasure are merely posturing to keep up appearances.)

Still, the bottom line is that this moves the Democrats closer to solving the funding problem. And that's a big deal. As I and others have written before, paying for universal coverage is the single biggest challenge reformers face.

Also of note in the letter is this passage:

If we do end up with a system where people are responsible for their own insurance, we need to provide a hardship waiver to exempt Americans who cannot afford it.

The message here is that, if Congress decides on an individual mandate--requiring that everybody get insurance--then there needs to be some sort of waiver for people who can't afford it. The waiver is not a controversial idea in principle and it's something Obama himself suggested during the campaign, as I recall. But I don't recall him talking about it since becoming president.

To raise the possibility, at such detail, signals more strongly than before his willingness to have an individual mandate. And while this was entirely expected--the administration's openness to an individual mandate has been reported before, starting here--such a clear, public statement paves the way for the final deal on this to be made. 

Update: Karen Tumulty has more, including the letter's strong support of a public insurance plan. Also, I made clear that Congress was already looking at some of these same Medicare/Medicaid savings. But that's how the process works. By putting it on paper, Obama makes it easier for members of Congress to embrace it, as well.

--Jonathan Cohn