The Medicare Catastrophic Coverage Act of 1988 and its impact on employer-sponsored retiree medical plans.

The Medicare Catastrophic Coverage Act of 1988 (MECCA) significantly enlarges the scope of federally funded health care benefits for elderly Americans. Since Medicare's inception in 1965, several inadequacies have become apparent, especially the absence of coverage for catastrophic illnesses. Now MECCA inhibits the potential financial ruin of elderly Americans faced with overwhelming, extended medical costs. The Act is budget-neutral and can reduce employers' Social Security payroll tax costs. However, the costs and complications of the maintenance-of-effort provision refunds and potential employee resistance to raised Medicare premiums, which could force some beneficiaries to cancel Part B participation and increase reliance on employer-sponsored plans, do pose problems for employers. Options and alternatives to these new opportunities and concerns are detailed herein.