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Why Was the Medicare Catastrophic Coverage Act (MCCA) of 1988 Repealed in 1989?
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The Medicare Catastrophic Coverage Act (MCCA) of 1988 was the largest expansion of Medicare since it was enacted in 1965. Its biggest impact was on hospital care, doctors' services and prescription drugs. The new law capped out-of-pocket expenses, expanded skilled nursing facility and hospital benefits, and offered outpatient prescription drug coverage.

To pay for these changes, beneficiaries were asked for the first time to foot the entire bill. A supplemental premium, basically an income tax on 40 percent of the elderly (up to $800 per year for an individual and up to $1,600 per year for a couple), was put in place.

Most seniors were strongly against this new legislation and a huge public outcry arose against it. They did not want to pay an extra tax to finance the expanded coverage for everyone. This was particularly the case for many upper-income beneficiaries who already had extensive retiree health coverage through group health insurance from a previous employer. The negative reaction was so strong that it forced Congress to repeal most of the MCCA in 1989, including the outpatient drug benefit and the cap on out-of-pocket expenses.


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