HOW THE SYSTEM IS FINANCED

The financing proposal was developed under the most rigorous and conservative forecasting standards. For the first time, representatives from every federal agency involved in fiscal accounting and financial projections have been brought together to work out the numbers. Then teams of actuaries, health economists and other financial analysts from outside the government served as auditors and consultants, checking and rechecking.

The system is financed from five major sources:

1) Medicare savings -- The savings from reducing the growth of Medicare are based on specific, scorable policy proposals. Every penny of these savings will be channeled back into benefits -prescription drugs and long-term care -- for the people which these programs serve.

2) Medicaid savings -- The rate of growth of Medicaid can be reduced primarily by folding the acute care portion of Medicaid into the overall health care system. Since everyone will be insured, there will be savings in "uncompensated care" -- the money that goes to doctors and hospitals to compensate for caring for the uninsured.

3) Savings from federal employee health care costs -- As all federal workers are integrated into the overall health care system, there will be less expense to taxpayers to provide for their health care.

4) Reducing the benefits of tax-free compensation -- By reducing the rate of growth for health insurance, the President's proposal lowers the amount of compensation paid as tax-free health benefits, and frees up money for higher wages, wages for new workers, or profits -- all of which are taxable and thus bring in new federal revenues.

5) Sin taxes -- There will be some new "sin taxes," the composition of which is not yet decided.

In addition, there will be other savings. Reducing paperwork and administration, cracking down on health care fraud, and emphasizing prevention will save money in the long-run.