Tax Equity & Fiscal Responsibility Act of 1982 & Medicare
- The Tax Equity and Fiscal Responsibility Act of 1982 was a federal law that changed several tax and other financial arrangements. It was later described in the National Review as "the largest peacetime tax increase in American history." The bill is sometimes referred to as TEFRA.
- TEFRA placed several limits on the way in which Medicare reimbursed hospitals. Existing limits on routine costs were extended to cover all costs, including expenses such as lab tests and X-rays. The act also introduced targets for the average cost each hospital spent on each Medicare patient, and limited the annual increases in these targets. There were also bonuses for hospitals that managed to keep costs below both the limit for payment and the target average costs.
- Some healthcare providers can receive reimbursements for Medicare above and beyond TEFRA limits. To get this, the provider must successfully apply by showing it has encountered substantially increased costs beyond its control. There are also certain types of healthcare providers that are exempt from the standard Medicare reimbursement system, and thus exempt from the TEFRA limits. These include cancer, children's and long-term care hospitals.
- TEFRA also affects businesses that have 20 employees who work for more than 20 weeks in a year. One effect is that employees who are old enough to qualify for Medicare can choose between the company's group health plan and Medicare as their primary health coverage. Until they make a choice, the costs of their healthcare must be paid by the group health plan. If an employee chooses Medicare as his primary coverage, he cannot use the company group plan as a supplemental plan.
- For companies with fewer than 100 employees, an employee who qualifies for Medicare through disability (as well as, or instead of, through her age) will automatically have Medicare as her primary coverage.
One exception to this rule is that when an employee's disability is due to End Stage Renal Disease, she will have the group plan as her primary coverage for the first 30 months after she qualifies for Medicare.
