The Balanced Budget Act of 1997

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The Balanced Budget Act of 1997 In 1997 the Clinton Administration signed into law the Balanced Budget Act. One of the key provisions of this act was reduction in Medicare payments to health care providers. The reductions threw a health care system that was essentially in equilibrium into turmoil. “Let me describe the BBA’s phase-out methodology in this way. Imagine a grocery store buys a gallon of milk from their wholesaler for $4.00, but the law allows the purchaser to buy that same gallon of milk for $3.00. Does anyone believe the purchaser won’t buy the milk for $3.00? How long would that store sell milk? If they did decide to sell milk, how long would they stay in business?” (D.H. Impact of Budget…) The answers to the questions are fairly obvious, but in fact this is exactly what the Balanced Budget Act of 1997 did to hospitals across the country. By substantially lowering the payments for Medicare patients, the government forced many hospitals and out of business and managed-care companies to stop caring for Medicare patients. According to Medicare’s WebPage Medicare is a Health Insurance Program for people 65 years of age and older, some disabled people under 65 years of age, and people with End-Stage Renal Disease (permanent kidney failure treated with dialysis or a transplant). Medicare has two parts, Part A which is for basically hospital insurance. Most people do not have to pay for Part A. In addition it has a Part B, which is basically medical insurance. Most people pay a small monthly fee for Part B. Medicare first went into effect in 1966 and was originally administered by the Social Security Administration. In 1977 the control of it was switched over to the newly formed Health Care Financing Administration. Beginning in July 1973 Medicare was extended to persons under the age of 65 with certain disabling conditions. In 1988 Congress passed legislation to expand the program to cover health care costs of catastrophic illnesses. The Balanced Budget Act of 1997 was designed to lower spending in some areas to help balance the budget. Hence the name Balanced Budget Act. The main area from which the BBA cuts back spending is Medicare. Changes in the Medicare program were an essential part of the budget agreement that led to the Balanced Budget Act of 1997. Without the $191.5 billion in net spending reductions over the next five years, a balanced budget would not have been achieved.

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