Hospital Benefit Repeal to Boost Costs for Some : Health: Rejection of catastrophic care plan could add to private insurance premiums, states’ financial burden.
The repeal of the catastrophic care law will force millions of people to pay more for their supplemental medical insurance and impose a major new financial burden on state governments.
Repeal will also bring bigger hospital bills to some of the sickest elderly, but provide substantial tax savings for senior citizens in higher income brackets.
By abolishing the catastrophic provisions of Medicare, Congress decided to end the virtually unlimited days of hospital care now available to Medicare beneficiaries under which patients pay $560 for the first day and receive the next 364 days free.
This benefit will continue for the 33 million Medicare beneficiaries until the end of the year. But on Jan. 1, Medicare returns to the old system. Under that plan, patients pay $592 for the first day in the hospital, nothing the next 59 days, then $138 a day.
Fewer than about 500,000 Medicare patients a year are hospitalized more than 60 days.
Congress’ action Wednesday ends the controversial surtax that would have meant higher payments in April for the 40% of Medicare beneficiaries who pay federal income taxes. The surtax would have ranged from $22 to $800 a year for a single taxpayer, a maximum of $1,600 for a couple filing jointly. Those who have paid any part of the surtax will get a refund.
The surtax sparked a nationwide wave of protest that culminated with the votes for repeal in Congress. Anger over the surtax overshadowed any enthusiasm among senior citizens for the largest expansion of health benefits since Medicare was created in 1965.
The surtax was designed to provide two-thirds of the money needed to pay for the new benefits, which included a ceiling on out-of-pocket spending for doctor bills and Medicare coverage of prescription drugs. One-third of the money needed for the program was to come from a $4 monthly premium paid by all beneficiaries under the Medicare insurance program for doctor bills.
The $4 catastrophic premium will be collected from Social Security checks for the last time in December. Next year, the total premium for Medicare coverage of doctor bills will be $29 a month.
Insurance companies will be raising their premiums in January for so-called Medi-gap insurance, which covers the bills Medicare does not pay. These companies had adjusted their premiums because, under the catastrophic law, Medicare would be paying some expenses previously covered by private insurance. With the catastrophic law eliminated, more of the burden of coverage shifts back to private insurance.
Private insurance premiums in 1990 will rise by an estimated 15.4% because of the repeal of the catastrophic law, according to a recent study by the General Accounting Office. The average private insurance premium will go from $58.71 a month this year for Medi-gap coverage to $69.35 a month.
The expenses of state governments will increase at least $500 million next year as more of the burden of providing health care for the poor shifts to the states.
A separate federal program was started in October to provide economic security for the spouses of people in nursing homes. Instead of spending all but a tiny part of family income and assets for nursing home costs, the family member at home will be permitted to keep at least $768 a month from any earnings, pensions or other family income. Moreover, the spouse at home must be allowed to keep the first $12,000 of the family’s assets and half of what remains, up to a maximum of $60,000.
While the new federal law is a boon to elderly residents of most states, it represents a disadvantage to California couples whose assets are greater than $120,000. Currently, California law allows the spouse at home to keep half of all the assets held by the couple. California has an exemption from the new law until January.
The states and the federal government share the costs of Medicaid (called Medi-Cal in California), a federal welfare program for the poor, which pays for nursing homes when families have exhausted their assets.
But, because families are permitted under the new law to preserve more of their assets, state governments will be forced to contribute more to nursing home costs. State governments this year have shifted payments for large numbers of nursing home patients to the federal government under the catastrophic care law. Those payments now will shift back to state governments.
