In 1983 Congress changed the way Medicare pays for hospital care.
Under the new prospective payment system, hospitals are paid a
fixed rate, set in advance, to cover a patient's stay. If costs are
less than the fixed rates, the hospital keeps the profit; if the
costs are more, it absorbs the loss. From the beginning,
prospective payment was recognized as a revolutionary change in
Medicare. Congress wanted a system that would make federal
expenditures more predictable and controllable, and expected
hospitals to respond by becoming more efficient. Some observers
have hailed it as a successful way to control the spiraling costs
of the Medicare program. Others have criticized it as arbitrary and
a threat to the health of the elderly. In the six years since
prospective payment was introduced, a substantial amount of
evidence has accumulated about its effects. Russell looks at the
major characteristics of the rate payment system, how it has
changed the pattern of medical service, how these changes have
affected the health of the beneficiaries, and the system's effects
on Medicare outlays. She reviews what is known and what needs to be
learned to arrive at a valid assessment of the system. Moreover,
she contributes to the larger debate on Medicare by making what are
frequently quite technical evaluations accessible to the general
public.
General
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