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This memorandum was prepared by the staff of the Human Resources and Community Development Division of the Congressional Budget Office. Permission to circulate the paper to others or to cite it should be obtained from Nancy M. Gordon, Assistant Director for Human Resources and Community Development. Questions regarding the analysis may be addressed to Lisa Potetz. |
The Tax Equity and Fiscal Responsibility Act of 1982 (P.L. 97-248), often referred to as "TEFRA", made significant changes in the system of Medicare hospital reimbursement. The existing Section 223 limits on reimbursement for routine costs were extended to include ancillary services. Limits were also placed on growth in Medicare reimbursements per discharge. In addition, hospitals below both limits will receive bonus payments. These changes are expected to reduce Medicare outlays by $10 billion over the fiscal year 1983-1986 period or 5 percent of what hospital reimbursements would otherwise be.
This memorandum analyzes the impacts of these provisions. The first section discusses the TEFRA provisions in more detail. The second section presents estimates of the proportion of hospitals affected by each of the limits, and the extent to which reimbursements will be reduced. The next two sections analyze the effects of the growth target and Section 223 limits, respectively, on different types of hospitals. The final section discusses the assumptions and methods underlying the analysis.
This document is available in its entirety in PDF.