By: Anaheeta Z. Kolah
Big title, isn’t it? Most politically ambitious, life-altering laws are. Think of the Tax Equity and Fiscal Responsibility Act of 1982 (TEFRA) as the Costco warehouse of laws. This federal law has everything in it related to saving money for the government, you just have to know where to look. TEFRA was one of the biggest tax increases in U.S. history – and it altered our health care in deeper ways that most do not understand. But in which section of this “Costco” of laws do we look to know what the feds did to our healthcare? Right when you enter – at the beginning, just like in Costco, are the big-ticket items. In the beginning of TEFRA sits the amendments to the most valuable aspect of the U.S. – our health care.
This law was the federal government’s response to reduce the federal budget deficit. TEFRA cut costs on federal spending by retracting tax breaks that had not yet gone into effect (but were just passed a year before in the Kemp-Roth Act), by closing off tax loopholes, by enforcing tax rules and raising tax rates, and by amending the Social Security Act. The amendments to the Social Security Act changed the way Medicare, Medicaid, and other health and income security programs were run.
The part of the TEFRA amendments that this article will address is primarily about Medicaid, and briefly Medicare.
TEFRA Health Care Summary
TEFRA amended provisions of the Social Security Act related to Medicare coverage for care provided in or by hospitals, skilled nursing facilities (SNFs), health maintenance organizations (HMOs), competitive medical plans, and hospices. It also amended provisions related to Medicaid enrollment and coverage. The professional standards review program was replaced. Amendments also affected Aid to Families with Dependent Children, the Work Incentive Program, child support enforcement, Supplemental Security Income, and unemployment compensation.
Below is the relevant part of TEFRA as archived on congress.gov:
- TITLE I – PROVISIONS RELATING TO SAVINGS IN HEALTH AND INCOME SECURITY PROGRAMS:
- SUBTITLE A – MEDICARE:
- PART I – CHANGES IN PAYMENTS FOR SERVICES
- SUBPART A – AMOUNT OF PAYMENT FOR INSTITUTIONAL SERVICES
- SUBPART B – PAYMENTS FOR OTHER SERVICES
- SUBPART C – OTHER PAYMENT PROVISIONS
- PART II – CHANGES IN BENEFITS, PREMIUMS, AND ENROLLMENT
- PART III – MISC. PROVISIONS
- PART I – CHANGES IN PAYMENTS FOR SERVICES
- SUBTITLE B – MEDICAID:
- SUBTITLE C – UTILIZATION AND QUALITY CONTROL PEER REVIEW
- SUBTITLE D – AID TO FAMILIES WITH DEPENDENT CHILDREN
- SUBTITLE E – CHILD SUPPORT ENFORCEMENT
- SUBTITLE F – SUPPLEMENTAL SECURITY INCOME (SSI)
- SUBTITLE G – UNEMPLOYMENT COMPENSATION
- SUBTITLE A – MEDICARE:
The Act also provided for many, many other areas of amendments, but not related to this article.
TEFRA and Medicare
Medicare was enacted in 1965 by President Lyndon B. Johnson as part of his “Great Society” programs. (42 U.S.C. Section 1395 et seq. Title XVIII (18)(MEDICARE) of the Social Security Act). It is the federal government’s nationwide health and hospital insurance program that subsidizes health care services for U.S. citizens age 65 or older; younger individuals who meet criteria for physical, intellectual, and developmental disabilities; and for persons needing dialysis or kidney transplants for the treatment of end-stage renal disease. It is administered and operated by the Centers for Medicare and Medicaid Services (CMS) at the federal, not state, level.
Medicare benefits are delivered through:
- Original Medicare Part A – inpatient hospital stays, hospice care, some skilled nursing
- Part B – outpatient care, doctor visits, durable medical equipment, and preventative services (traditional fee-for-service)
- Part C, aka, Medicare Advantage – Medicare Advantage is not Medicare per se, it is a private company, most likely a Health Maintenance Organization (HMO) that covers those under Medicare
- Part D – prescription drug coverage
TEFRA amended the existing Medicare program from providing retrospective payments (via reimbursement) to prospective payments for inpatient hospitalizations using the diagnosis-related group (DRG) coding system. Further, TEFRA’s amendments to the Medicare system allowed for certain payments for hospice care, designated Medicare as the “secondary payer” for health services if a beneficiary had private health insurance, established utilization review, allowed for contracting of Part C Medicare with health maintenance organizations (HMOs), and established the TEFRA Medicaid Waiver – aka, the Katie Beckett waiver.
TEFRA Medicaid Option and Katie Beckett “Waiver”
Medicaid is the public health insurance program that provides healthcare coverage to low-income families and individuals in the United States. It is a joint federal and state health insurance program, operated at the state level. Unlike federal Medicare coverage that follows the beneficiary and is the same coverage no matter what state the beneficiary is in, Medicaid varies state to state. An individual must meet their state of residency’s rules for income and resources to qualify for Medicaid. States have a lot of flexibility in choosing which Medicaid options to implement.
One of the TEFRA amendments to Title XIX (Medicaid) of the Social Security Act was to create the TEFRA Medicaid Eligibility Option (aka, Katie Beckett Waiver) for children under the age of 19 who have complex medical or long-term disabilities to be able to receive care in a home setting rather than an institution. This waiver is granted on a state-by-state basis, so there are differences in availability, eligibility guidelines, and what services are offered.
Katie Beckett was five months old when she contracted viral encephalitis, suffered two brain seizures resulting in severe respiratory distress, went into a coma, and became dependent on a ventilator to breathe. She spent three years in a hospital. The Beckett parents’ income was above eligibility for Medicaid, but not enough to pay for her home care. At that time, a child with severe disabilities who otherwise did not qualify for Medicaid could only become eligible if the child spent more than 30 consecutive days in an institution, with the parents responsible to pay for the first 30 days. Thereafter, Medicaid would cover all subsequent costs for institutional care, but not home care, even though institutional was far more expensive than home care. The only way to qualify for full Medicaid coverage was for Katie’s cost of care to impoverish the family or for the parents to give up custody of Katie to the state. Many families faced the same situation as the Becketts.
The Katie Beckett Waiver was created 1981 when then President Ronald Reagan heard her story. He made changes to then existing Medicaid rules to make an exception (rules were “waived”). Originally, for a child with significant medical needs to get their treatment at home, the child’s total income included their parents’ income. In 1982, Congress amended the Medicaid law with TEFRA to include the Katie Becket Waiver, which created a new State Plan Option under section 134 – the Katie Beckett provision – allowing states to extend Medicaid eligibility to certain children and adolescents (18 and under) with disabilities by not counting their parents’ income.
One key difference in the TEFRA option versus Medicaid waivers is that TEFRA is an option, not a waiver. TEFRA gives participating states the option to make Medicaid benefits available for children who would not ordinarily be eligible for Supplemental Security Income (SSI) benefits to be cared for in their homes. States only have to inform the regional CMS office that the option has been selected. With the option, the state must enroll all children who qualify under TEFRA (see below) and cannot limit the number of slots or single out particular disabilities.
The TEFRA option requirements are:
- Be 18 and younger, AND
- Must be determined to have a physical or mental disability under the federal standards of the Supplemental Security Income (SSI) disability program, AND
- Have qualifying income and resources (child’s only), AND
- Meet the STATE’S DEFINTION of institutional level of care requirement – the three levels of care, which the child does not have to actually reside in but must need, are:
- Intermediate care for individuals with intellectual disabilities,
- Nursing facility/home, or
- Hospital, AND
- Have medical care needs that can be safely provided outside of an institutional setting, AND
- The estimated cost of caring for the child at home cannot exceed the estimated cost of caring for the child in the institution.
Most states changed the name of the Katie Beckett Waiver to the TEFRA Medicaid Option. Since Medicaid is a state-run program, not all states are required to have the TEFRA Medicaid Option. Visit kidswaivers.org to learn whether your state offers it, or check with your state’s Medicaid office online.
Note that some states will bill Medicare or private insurance first, then use Medicaid as “wrap-around” coverage for medically necessary services that the private plan and Medicare do not cover. To learn whether your state does this, it is necessary to consult with your state’s Medicaid office. However, if the child meets the requirements, then they are eligible regardless of first payor.
After the age of 19, disabled individuals can transition to Medicaid Home and Community-Based Services Waivers (see below). If the child is not dual-eligible for Medicare and Medicaid, then around the age of 18 families should apply for Supplemental Security Income (SSI). The child, as an adult, if approved, can become eligible for full Medicaid benefits in their state.
Other Capped Medicaid Waivers
Since the TEFRA Medicaid Option, there have been increasing budgetary pressures within the states. So, the states sought a way to control those costs by creating varying Medicaid waivers for children in higher income families who meet an institutional level of care.
Medicaid waiver programs are a way for the federal government or states to change the Medicaid rules about who can access Medicaid and the health care it covers. States create groups of individuals with specific needs and health conditions to be eligible to receive certain services and supports for Medicaid. For example, waivers are available for care relating to intellectual/developmental disabilities (IDD), traumatic brain injuries (TBI), AIDS (Acquired Immunodeficiency Syndrome), and substance use disorders (this varies state-to-state, so check with Medicaid in your state). There are many Medicaid waivers available in states across the country and Medicaid provides a full list of them.
Types of waivers:
- Section 1915(C) Home and Community Based Services (HCBS) Waivers
- Section 1115 Demonstration Waivers
- Sections 1915(i), 1915(j), and 1915(k) State-Based Programs
To qualify a child with mental or physical disabilities for Medicaid under these Medicaid waivers, the state must submit an application to CMS, monitor it as a separate program, and provide data on the program. A renewal application is submitted every 3-5 years. Unlike Katie Beckett Waivers, states can target these waivers to particular groups of children and adults. Thus, there are wait lists, limits, and singled out disabilities.
This article is about Public Law 97-248, enacted September 3, 1982. Nothing in this article is to be construed as legal advice.
