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37 IRET Policy Bulletin 1 (1989)

handle is hein.taxfoundation/iretpbul0007 and id is 1 raw text is: _ __R_ _ __ July 19, 1989 =kdINo. 37 THE MEDICARE CATASTROPHIC COVERAGE ACT: A CASE FOR REPEAL (Part II) The catastrophic Medicare Catastrophic Coverage Act (MCCA) should be repealed and replaced by legislation that is needed to deal with the problem of financing health care for the relatively small number of persons who are not poor enough to qualify for Medicaid but not well enough situated financially to purchase their own health insurance. MCCA's Sins of Omission and Commission Recent developments in the Congress have heightened the awareness of many Americans about questions of ethics in government. I certainly don't want to extenuate for the misdeeds of anyone in government, but I believe we must not focus only on personal misbehavior and overlook unethical legislation. Legislation that promises what it can't and won't deliver, that misrepresents its benefits and beneficiaries, and that disguises its costs is the ultimate in political immorality in a democratic republic. I respectfully submit that few if any pieces of legislation in the modern era can top MCCA as legislative fraud. MCCA is represented by its defenders as a good deal for those eligible for its coverage. In fact, it is a bad deal, costing the average older citizen substantially more than the actuarially determined average value of the benefits he or she can expect to claim. Widely presented as low-cost insurance, MCCA in fact has no attributes of a true insurance system. It is, instead, a tax-transfer scheme, requiring virtually all not-poor persons who are 65 or older to pay for the covered medical expenses of a small group of older persons who are not quite poor enough to qualify for Medicaid. Receipts under MCCA are expected to exceed its outlays in the first few years, with the excess revenues contributed by taxpayers who are 65 or older going to defray general expenses of the federal government. Much of the MCCA revenues are obtained from an income tax surcharge payable only by persons who are 65 or older and solely by reason of their age and the fact that they have enough income to have to pay ordinary income tax. This highly Institute for IRET is a non-profit, tax exempt 501 (c)(3) economic policy research and educational organization devoted to informing the public about policies that will Research on the promote economic growth and efficient operation of the free market economy. Economics of 1331 Pennsylvania Ave., N.W., Suite 515, Washington, D.C. 20004 (202) 347-9570 Taxation