Change in Contingency Reserve Funding Held Down Increase in Part B Premium

HRD-88-40BR: Published: Nov 30, 1987. Publicly Released: Jan 4, 1988.

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Pursuant to a congressional request, GAO compared the Health Care Financing Administration's (HCFA) previous and current methods for computing Medicare Part B premiums for supplementary medical insurance covering physician and other health care services.

GAO found that HCFA: (1) changed its computational method to ensure an adequate reserve in the Part B trust fund to cover contingencies; (2) formerly viewed the Part B trust fund as being composed of an aged portion and a disabled portion; (3) did not separate the trust fund into aged or disabled portions in calculating 1988 premiums, which allowed it to use the large surplus in the disabled portion to fund the large deficit in the aged portion; and (4) was able to reduce the 1988 monthly premium increase by about $1.70 through this computational method.

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