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CATASTROPHIC CARE $ 6 BIL. DEFICIT THROUGH 1993: SKILLED NURSING

Executive Summary

CATASTROPHIC CARE $ 6 BIL. DEFICIT THROUGH 1993: SKILLED NURSING facility cost data recently developed by the Congressional Budget Office is raising CBO's cost predictions for the total Medicare catastrophic care program, Rep. Fawell (R-Ill.) told members of Congress in an Aug. 24 "Dear Colleague" letter. As a result, CBO is estimating the catastrophic program could run up an overall deficit of $ 6 bil. between fiscal years 1989 and 1993, Fawell said. Fawell's office has been given a preview of the new CBO estimates; the data is expected to be publicly available in early September. Fawell is sponsoring legislation to delay implementation of the new catastrophic benefits for one year. In April, Fawell's letter notes, "CBO estimated the cost of the catastrophic law's benefits to be $ 30 bil. for the 1989-1993 period, with revenues of $ 39 bil. Now, just four months later, CBO is expected to estimate the program's costs at $ 45 bil. for the same period." He emphasized that "in just four months, catastrophic has changed from a program which will run a $ 9 bil. surplus to a program heading straight for bankruptcy ( $ 6 bil. deficit)." Fawell also said that the Bush Administration has "raised its five-year [cost] estimate to more than $ 55 bil." An Aug. 7 CBO memo says that according to Health Care Financing Administration data, "monthly [skilled nursing facility(BRACKET) spending rose from $ 62 mil. in January 1988 to $ 99 mil. in December 1988, a 60% increase over the year." The memo adds that "spending this year has risen at an even higher rate, from $ 97 mil. in January to $ 283 mil. in May." Like other Part A provisions of the catastrophic care law, the nursing benefit, representing a broadening of previous nursing coverage, went into effect January 1. The revisions, among other things, removed Medicare's requirement that the patient must have been hospitalized within three days of going to the facility. In addition to the new data on skilled nursing facilities, the change in estimates since April is based on higher than expected costs for the outpatient prescription drug benefit. CBO had projected in July that at current prescription drug deductible levels, up to 27% of Medicare beneficiaries could qualify for drug reimbursement each year, rather than the 16.8% built into the law, and that the drug benefit trust fund could be in the red by 1991 ("The Pink Sheet" July 17, p.3). At that time, however, CBO did not release estimates for the overall catastrophic program. The new CBO figures will step up pressure on lawmakers to revise the catastrophic care act when Congess reconvenes after Labor Day. The Senate Finance Committee plans to review catastrophic care modifications at a Sept. 7 markup session ("The Pink Sheet" Aug. 21, p. 6). Also pending is a House Ways and Means proposal to tie catastrophic care benefits, including the drug benefit, to Part B, to technically make them voluntary. The committee is further proposing to halve the supplemental premium while raising the flat monthly catastrophic care premium paid by all Part B participants. The plan is part of the committee's fiscal 1990 budget reconciliation package ("The Pink Sheet" July 31, p. 17) and must be cleared by the full House. Fawell is sponsoring a "discharge petition" to allow immediate House floor consideration of HR 2770, his bill to delay for one year the supplemental premium and all benefit expansions that have not yet been implemented. The petition would allow consideration of other measures, including repeal of the entire act. Fawell says he is now "convinced that repeal is the only way to go." House procedures would allow the petition to be brought up in mid-September if Fawell can sign up 218 cosponsors.
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