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Analysis of Medicare Hospital Reimbursement Changes in the Tax Equity and Fiscal Responsibility Act of 1982 1 (March 1983)

handle is hein.congrec/cbo9091 and id is 1 raw text is: 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 dis- charge. 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. DESCRIPTION OF CHANGES IN MEDICARE REIMBURSEMENT INCLUDED IN TEFRA TEFRA made three major changes in Medicare hospital reimburse- ment. First, the Section 223 limits on routine per diem costs were extended to cover total costs per discharge. Second, growth in reimbursements per discharge was limited for a three-year period. Finally, bonus payments were instituted for those hospitals under both limits. Hospitals exceeding both limits are reimbursed according to the lower of the two limits.

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