$700 Billion Price Put on Health Plan Taxes, Savings from Medicare, Medicaid to Help Fund Program

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If enacted, President Bill Clinton's health-care reform plan would cost the federal government an estimated $700 billion over five years, administration officials and congressional sources said Thursday.

Of that, $105 billion would come from new taxes on cigarettes, alcoholic beverages and some large corporations.

About $285 billion would be funded from savings realized by imposing caps on Medicare, Medicaid and other publicly funded health programs and by using that previously budgeted money to subsidize the cost of health premiums for small firms and low-income workers. The plan would cut the projected rate of growth of Medicare and Medicaid by about one-half.

In addition, an estimated $259 billion would be raised by requiring firms that employ Medicare and Medicaid recipients to pay part of the cost of those employees' health-care coverage. The White House expects to raise another $51 billion when employers' costs of providing health benefits decline, as the plan assumes they will. Presumably, these savings would result in higher wages, which are subject to federal income tax; company expenditures on health benefits are not taxed.

How realistic those and other administration estimates are, and how they will be received by various interest groups, will be the focus of heated debate over coming months.

Thursday, a cacophony of criticism, confusion and enthusiasm followed Hillary Rodham Clinton as she traveled to Capitol Hill to brief House and Senate leaders of both parties on the plan.

Liberals who follow Medicaid and Medicare spending questioned whether such limits would result in unacceptable cutbacks in the quality and amount of care. Conservatives, including members of a potentially powerful coalition in the making between conservative Democrats and Senate Republicans, expressed doubts about the wisdom of government controls on health spending.

Asked about limits on Medicaid and Medicare spending, Senate Majority Leader George J. Mitchell, D-Maine, said, "The question is whether those costs can be controlled in a reasonable way, and I believe they can." He added that much of the proposed savings from Medicare would be spent for increased drug and long-term care benefits for the elderly. …