THE RISE AND FALL OF THE MEDICARE CATASTROPHIC COVERAGE ACT

• Published in: National tax journal Vol. 43; no. 3; pp. 371 - 381
• Main Author: MOON, MARILYN
• Format: Journal Article
• Language: English
• Published: Chicago, Ill National Tax Association 01.09.1990; The University of Chicago Press; University of Chicago Press
• Subjects: Beneficiaries; Congressional committees; Cost estimates; Economic benefits; Federal budget; Fiscal policy; Hospital costs; Income taxes; Insurance premiums; Legislation; Low income groups; Medicaid; Medicare; Medicare-US; Natural satellites; Older adults; Older people; Personal income; Policy making; Political debate; Proposals; Tax benefits; Tax rates; Taxes
• ISSN: 0028-0283; 1944-7477
• DOI: 10.1086/NTJ41788855

The 1988 Medicare Catastrophic Coverage Act, the major piece of social legislation passed in the Reagan administration, was repealed a year and a half after it was enacted. Although the final law was to be cost neutral from the federal government's perspective, there were going to be individual winners and losers among the beneficiaries from this legislation. The bottom 70% of Medicare enrollees as ranked by their incomes would experience a net reduction in out-of-pocket costs. Higher income enrollees would face higher costs, primarily because of the supplemental premium. Several lessons can be learned from the failure of the act: 1. The backlash by senior citizens stemmed from the size of the premium and the feeling that they had been deceived. 2. The act offered a bewildering variety of benefits to the elderly, while the financing mechanism was straightforward and unpopular. 3. The elderly seemed quite satisfied with Medigap programs. 4. The financing mechanism represented a formal acknowledgement of the disparities that exist in the income status of the elderly.