Catastrophic Health Care Act of 1988

The Catastrophic Health Care Act of 1988 was an attempt to improve medical care for the elderly. It was repealed 17 months after passing into law, a move blamed on many senior citizens already receiving many of the benefits it offered and resenting paying additional taxes to fund the program. The program represented the most significant increase in the scope of publicly funded health care since the introduction of Medicare and Medicaid 23 years earlier, and the debate over the Act's introduction and repeal helped set the context of future health care legislation debates.

Aims and Context

The stated aim of the Act was to reduce the risk of elderly people facing serious financial difficulties as a result of serious illness. "The New York Times" argued that the Act was also politically motivated, with then-President Ronald Reagan attempting to counteract the image caused by his plans to cut Social Security benefits.

Measures

The Act introduced three main benefits for Medicare recipients. The new rules meant they would only have to make co-payments for the first 60 days of a continuous spell in the hospital and would only have to pay the related $560 deductible once in a 12-month period. The new rules also meant co-payments for physician care were limited to $1,370 a year. Finally, the money recipients paid toward prescription drug costs was restricted both in terms of the amount paid and the proportion of the costs, with the levels scheduled to reduce further in each of the following two years.

Funding

The measures of the Act were to be funded entirely by Medicare recipients through two routes. All recipients would pay an additional monthly premium for the program, rising from $4 in 1988 to $10.20 in 1993. Anyone older than 65 with an income of at least $15,000 would pay a higher tax rate that could increase their tax bill by up to $800 a year. Around 40 percent of over-65s had high enough incomes to pay some of this surtax, while 5 percent would pay the full $800.

Reaction and Repeal

After extensive protest by elderly people who objected to the tax increase, members of Congress were persuaded to repeal the Act in December 1989. A common complaint by critics was that the Act did not bring enough additional benefit to justify the tax increase. However, a survey for Health Affairs found that many elderly people had not understood the effects of the Act: For example, fewer than one in 10 of those surveyed realized that not all Medicare recipients would have to pay a higher tax rate.

References

• New York Times: Retreat in Congress; The Catastrophic-Care Debacle - A special report
• New York Times: A History of Overhauling Health Care
• Health Affairs: The Medicare Catastrophic Coverage Act: a Post Mortem