Recent Changes in Medicare and Medicaid

31 Presentation RECENT CHANGES IN MEDICARE AND MEDICAID RUTH S. HANFT, Ph.D. Research Professor Department of Health Services Administration George Washington University Although PUBUC attention has focused on the recent changes in Medicare, particularly the finandng of new benefits, the Medicare Catastrophic Coverage Ad of 1988 also instituted major expansions of Medicaid for mothers and children, and the aged and disabled. These changes continued a trend begun in 1984 to restore cuts in Medicaid made in 1981, and to reverse the decline in the proportion of people living in poverty who are eligible for Medicaid coverage. While Congress may repeal or reduce the expanded Medicare benefits, it will retain the Medicaid provisions. In broad terms, the legislation 1) expanded Medicare benefits for the first time since 1965, and dramatically changed the finandng concept, placing most of the finandng burden on the beneficiary; and 2) accelerated an expansion of Medicaid, begun in the mid-1980s, particularly regarding liberalized coverage for mothers and children , and instituted a number of changes related to low-income Medicare beneficiaries . The Medicare Catastrophic Coverage Ad of 1988 will probably go down in history as a classic case of a good idea gone wrong, and a misreading by the Administration, the Congress, and the American Assodation of Retired Persons (AARP) of the interests of a powerful group, the elderly. Medicare in brief Medicare is a sodal insurance program that, without regard to income, provides acute-care benefits to most of the population over 65 and to those eligible for disability benefits. There are limitations on the duration of many benefits and no limit on out-of-pocket expenditures for those eligible. Medicare provides very limited coverage for long-term care. The intent of the catastrophic coverage legislation was to cover prolonged and expensive hospital and physidan services. In the course of the legislative Journal of Health Care for the Poor and Underserved,^ o\. 1, No. 1, Summer 1990 32____________Recent Changes in Medicare and Medicaid process, other benefits were added, including: • drug coverage after a high deductible; • expanded home health benefits; • liberalized skilled nursing home benefits; • respite care; • mammography. While the elderly appeared to approve all of the new benefits, and their major spokesman, the American Association of Retired Persons, actively supported the legislation, the financing of the benefits was a major departure from Medicare's prior practice and from social programs in general. The financing was based on the new premise that the benefidaries themselves should pay for the benefits through an increase in the Part B Medicare premium, and a slidingscale surtax, based on income. The annual surtax would range as high as 15 percent, capped at a maximum of $800 per person; the cap would be raised each year. It should be noted that the finandng burden was placed on the upper- and middle-income elderly, while substantial benefits would accrue to the lower-income and chronically ill elderly. Two fadors, both focusing on financing, triggered the current backlash from the elderly. (The backlash has come mainly from the more affluent elderly, particularly those who will pay the full 15 percent surtax.) The first factor is that many of the more affluent elderly already have supplementary health insurance through their former employers at no or low cost. Retired federal employees were major opponents of the Act, as well as those who had retired from major corporations. The second was a newly organized interest group, the Committee to Proted Social Security, purporting to protect the Social Security system and Medicare, that emphasized that while the under-65 group had enjoyed a major tax cut, the taxes of the elderly would increase, and that no other age group had been asked to pay directly for their own sodal benefits on a current basis. As reported by newspapers and television, the backlash was severe, and Congress is now either repealing the Ad or substantially reducing its coverage. (At this point, the House has repealed all of the Medicare provisions and the Senate has reduced them substantially.) A conference and a vote of both houses will determine the outcome. Compounding the backlash was the recent reestimate by the Congressional Budget Office that benefits for drugs and nursing home...