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.

A growing body of research indicates that prevention offers the promise of better ways to maintain health and extend life. In this timely volume, Louise B. Russell shows that preventive measures are not as simple as often depicted while many do improve health, they are not without risk or cost, and in fact rarely reduce medical expenditures. Each measure, she argues, must be evaluated individually and in all its dimensions: health benefits, health risks, and resource costs.To demonstrate the many factors involved in evaluating preventive measures, Russell examines the policy debates about smallpox and measles vaccination, screening and drug therapy for hypertension, and exercise. She uses these case studies to explain the methods of cost-effectivness analysis, showing how the choice among health investments can be made a more rational exercise. The volume concludes with a suggested framework for the design of future cost-effectiveness evaluations. Policymakers in and out of the health field will benefit from this lucid examination of the potential of prevention for improving health and changing the allocation of limited resources.

"A copublication with the Milbank Memorial Fund"
Prevention is the best cure--or is it? As medical experts hammer home the importance of annual medical checkups and routine screening for everything from high blood pressure to cancer, Americans have come to believe that frequent screening tests are essential for saving lives. But just how effective are the tests that we have come to take for granted? In this provocative book, medical economist Louise Russell challenges the standard wisdom that more is necessarily better by examining three routinely administered tests--those designed to detect cervical cancer, prostate cancer, and high levels of cholesterol.
Standard recommendations such as annual Pap smears for women and prostate tests for men over forty are in fact simply rules of thumb that ignore the complexities of individual cases and the tradeoffs between escalating costs and early detection, Russell argues. By looking beyond these recommendations to examine conflicting evidence about the effectiveness of screening tests, Russell demonstrates that medical experts' recommendations are often far simpler and more solid-looking than the evidence behind them. It is not at all clear, for example, that annual Pap smears are effective enough in reducing deaths from cervical cancer to justify the enormous additional costs involved in testing all women every year rather than every three years. Nor is there solid evidence for the value of prostate cancer screening, despite recommendations that all men over forty be tested annually.
The three case studies presented here, each important in its own right, raise serious questions about how tests are evaluated, recommendations formed, andmedical resources allocated. At a time when American health care policies and the escalating costs of health care are the object of renewed scrutiny, Russell's challenge to conventional wisdom is especially important. Based on a detailed analysis of the available medical research, yet written in a straightforward, jargon-free style, "Educated Guesses" will be required reading for all those concerned about making informed choices about health care policies and their personal health.

This is a unique, in-depth discussion of the uses and conduct of cost-effectiveness analyses (CEA) as decision-making aids in the health and medical fields. The product of over two years of deiberation by a multi-disciplinary Public Health Service appointed panel that included economists, ethicists, psychometricians, and clinicians, it explores cost-effectiveness in the context of societal decision-making for resource allocation purposes. It proposes that analysts include a "reference-case" analysis in all CEA's designed to inform resource allocation and puts forth the most expicit set of guidelines (together with their rationale) ever outlined of the conduct of CEAs. Important theoretical and practical issues encountered in measuring costs and effectiveness, valuing outcomes, discounting, and dealing with uncertainty are examined in separate chapters. These discussions are complemented by additional chapters on framing and reporting of CEAs that aim to clarify the purpose of the analysis and the effective communication of its findings. Primarily intended for analysts in medicine and public health who wish to improve practice and comparability of CEAs, this book will also be of interest to decision-makers in government, managed care, and industry who wish to consider the roles and limitations of CEA and become familiar with criteria for evaluating these studies.