Medicare Catastrophic Act:

Options for Changing Financing and Benefits

HRD-89-156: Published: Sep 15, 1989. Publicly Released: Sep 22, 1989.

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Pursuant to a congressional request, GAO reviewed the Medicare Catastrophic Coverage Act of 1988 (MCCA) to identify options for restructuring benefits and financing, due to congressional and public concern regarding increased premiums.

GAO found that: (1) MCCA, which authorized substantial increased protection for Medicare beneficiaries who incurred large health care expenses, established a catastrophic premium, a prescription drug premium, and a supplemental premium for higher-income beneficiaries, to pay for increased Medicare costs; (2) enhanced hospital insurance benefits included decreased inpatient services deductibles, a maximum beneficiary liability for skilled nursing facility services, more intensive home care services, and unlimited coverage for hospice care; and (3) enhanced supplementary medical insurance benefits included a cap on beneficiary cost-sharing, respite care benefits, mammography screening, and increased prescription drug coverage. GAO also found that alternatives to funding MCCA from beneficiary premiums included: (1) increasing hospital insurance tax rates paid by active workers and employers; (2) raising such general revenues as cigarette and alcohol taxes; (3) funding enhanced benefits in the same manner as regular benefits and new benefits entirely from beneficiaries; (4) repealing or modifying some or all the enhanced benefits; (5) redistributing MCCA funding among beneficiaries; (6) repealing or phasing out MCCA; and (7) making MCCA optional.

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