Many people outside the Medicare and health care world don’t know that in 1989 Medicare was briefly, dramatically altered. The “Medicare Catastrophic Coverage Act,” (MCCA) was the most significant revision to Medicare since its inception. The law increased the amount of coverage available in all care settings, established limits to beneficiary cost-sharing, and added new benefits. Unfortunately, MCCA also added a new financing model; this proved to be the law’s undoing.
From January 1, 1989 through December 31, 1989 – when it was repealed – MCCA eliminated the “Spell of illness” benefit period for hospital and SNF coverage, established a single annual inpatient hospitable deductible, and removed co-pays and “lifetime reserve days” for hospital coverage. MCCA also expanded SNF coverage to 150 days per year, limited co-pays to the first 8 days of SNF care per year, and eliminated the prior 3-day inpatient hospital stay requirement. (This 3-day stay requirement causes more problems today than ever before, as so-called outpatient “Observation Status” comprises a greater share of hospital stays all the time, keeping beneficiaries from qualifying for SNF coverage.) In addition, MCCA removed the cap on the number of days of Hospice coverage.
MCCA was also supposed to add enormous value to Medicare Part B. In 1990 a $1370 cap on out-of-pocket expenses was to become effective, as was coverage for “respite care” for individuals caring for chronically ill beneficiaries. And, perhaps most incredibly, a prescription drug benefit was to become a Part B benefit. Tragically, none of these additions were implemented.
What happened? MCCA looked only to those eligible for Medicare to pay for the new benefits. This annual payment, a set amount based on tax liability, was to apply to all Medicare enrollees, regardless of whether they participated or utilized the benefits. Opposition to this funding mechanism, which became known as the “Medicare Surtax,” resulted in such a groundswell that all the Medicare components of MCCA were repealed in December 1989.
The MCCA benefits seem like a dream now. Oh, what might have been.