Covering Catastrophic Expenses Under Medicare

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Abstract
Prologue:The Medicare Catastrophic Coverage Act of 1988, crafted by Congress and the Reagan administration in a struggle that extended over sixteen months, provides beneficiaries with the broadest extension in health insurance benefits since the enactment of Medicare twenty-three years ago. At a time when an increasing chorus of voices is calling into question federal entitlements to America's middle class, Congress and President Reagan demonstrated their willingness to extend Medicare's coverage only if the costs were paid entirely by enrollees. Reagan, despite his conservative instincts, triggered the congressional action by calling for study of the issue in his 1986 State of the Union address. In this paper, Sandra Christensen and Rick Kasten of the Congressional Budget Office (CBO) describe Medicares new catastrophic provisions and analyze their likely financial impact on the program and its thirty-two million beneficiaries. Christensen, who holds a doctorate in economics from the University of Wisconsin, has worked at CBO since 1980. She was the author of a CBO study published in 1986 entitled, “Physician Reimbursement Under Medicare: Options for Change.” Her most recent work is a study of Medicare beneficiaries' out-of-pocket costs since the program implemented prospective payment. Kasten, who holds a doctorate in economics from the Massachusetts Institute of Technology, has been at CBO since 1985 and works in its Tax Analysis Division on issues involving income taxes and their distributional impact. CBO's involvement in the shaping of the catastrophic health insurance benefit is a story unto itself. During the 1980s, an era when the executive and legislative branches of government have grown distrustful of each other, Congress has relied far more heavily on its own agencies, which are independent of the executive branch, for policy analysis and counsel. These agencies include CBO, the Office of Technology Assessment, the Library of Congress' Legislative Research Service, and the General Accounting Office.

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