Medicare and Medicaid:

Effects of Recent Legislation on Program and Beneficiary Costs

HRD-87-53: Published: Apr 8, 1987. Publicly Released: Apr 22, 1987.

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Pursuant to a congressional request, GAO reviewed the effects of major legislative changes after 1980 on: (1) Medicare and Medicaid program costs; and (2) program beneficiaries' costs.

GAO found that, since a number of interrelated factors affected overall Medicare program costs, it could not quantify changes in costs solely attributable to the major legislative changes. GAO estimated that, if the prior growth rate had continued: (1) from 1981 through 1985, Medicare inpatient hospital costs would have been about $11.5 billion more than they were; and (2) for fiscal years 1984 and 1985, Medicare supplementary medical costs would have been about $1.7 billion more than they were. GAO also found that: (1) Medicaid cost growth declined from an average 15 percent for the period 1973 through 1981 to about 8 percent in 1982; and (2) from 1983 through 1985, states tended to increase Medicaid costs by expanding program eligibility and services. In addition, GAO found that: (1) legislative changes increased the Medicare hospitalization deductible about 49 percent from 1980 to 1985; (2) legislative changes increased the Medicare supplementary medical insurance premium about 31 percent during the same period; and (3) pursuant to the Tax Equity and Fiscal Responsibility Act of 1982, many states adopted cost-sharing provisions for Medicaid services.

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