President Obama's plan to require private insurance carriers to reimburse the Department of Veterans Affairs for the treatment of troops injured in service has infuriated veterans groups who say the government is morally obligated to pay for service-related medical care.

Calling it a "desperate search for money at any cost," Craig Roberts, media relations manager for the American Legion, told FOXNews.com on Tuesday that the president will "wish away so much political capital on this issue" if he continues to insist on private coverage for service-related injuries.

Cmdr. David K. Rehbein of the American Legion, the nation's largest veterans group, called the president's plan to raise $540 million from private insurers unreasonable, unworkable and immoral.

"This reimbursement plan would be inconsistent with the mandate 'to care for him who shall have borne the battle,' given that the United States government sent members of the Armed Forces into harm's way, and not private insurance companies," Rehbein said late Monday after a meeting with the president and administration officials at the Veterans Affairs Department.

"I say again that The American Legion does not and will not support any plan that seeks to bill a veteran for treatment of a service-connected disability at the very agency that was created to treat the unique need of America's veterans," Rehbein said.

Roberts said that 11 veterans service organizations were told to come up with another plan if they didn't like this one. The groups met on Monday with Obama, Chief of Staff Rahm Emanuel, Veterans Affairs Secretary Eric Shinseki and Office of Management and Budget defense spending chief Steven Kosiak.

"What we've been tasked with now is to raise this money through alternative means and we're supposed to have a conference call in two or three days ... with Rahm Emanuel. So the implication was ... you guys come up with a better idea or this is what's going to happen," Roberts said.

A summary of the proposed budget says the president wants to increase funding for VA by $25 billion over five years, and bring more than 500,000 eligible veterans of modest income into the VA health care system by 2013.

However, White House spokesman Robert Gibbs said Tuesday that no plans have been enumerated yet about veterans health care.

"Let me not make the case for a decision that this administration hasn't made yet regarding the final disposition or decision on third-party billing as it relates to service-related injuries," he said.

"The veteran service organizations ... can have confidence that the budget the president has proposed represents an historic increase in discretionary spending to take care of our wounded warriors, those that have been sent off to war, have protected our freedom, and have come back wounded," Gibbs continued.

But Roberts said the president's plan would increase premiums, make insurance unaffordable for veterans and impose a massive hardship on military families. It could also prevent small businesses from hiring veterans who have large health care needs, he said.

"The president's avowed purpose in doing this is to, quote, 'make the insurance companies pay their fair share,'" Roberts said. "It's not the Blue Cross that puts soldiers in harm's way, it's the federal government." 

Roberts said that the American Legion would like the existing system to remain in place. Service-related injuries currently are treated and paid for by the government. The American Legion has proposed that Medicare reimburse the VA for the treatment of veterans.

He added that the argument about the government's moral obligation to treat wounded soldiers, sailors and Marines fell on deaf ears during the meeting.

"The president deflected any discussion when it got into any moral issue here," he said. "Any attempt to direct the conversation (to the moral discussion) was immediately deflected."

Private insurance is separate for troops who need health care unrelated to their service. But Roberts noted that if a wounded warrior comes back and needs ongoing treatment, he or she could run up "to the max of the coverage in very short order," leaving his family with nothing

Roberts added that how the plan would raise $540 million "is a great mystery and it seems to be an arbitrary number. ... The commander said it seemed like this phantom number."

Monday's meeting was preceded by a letter of protest earlier this month signed by Rehbein and the heads of 10 service organizations. It read that "there is simply no logical explanation" for the plan to bill veterans' personal insurance "for care that the VA has a responsibility to provide."

The letter called it "unconscionable" to shift the burden of the country's "fiscal problems on the men and women who have already sacrificed a great deal for this country." Rehbein testified to both the House and Senate Veterans' Affairs Committees on those same points last week