Medicare Prospective Payment and the Shaping of U.S. Health Care

by Rick Mayes PhD, Robert A. Berenson MD

Overview

This is the definitive work on Medicare’s prospective payment system (PPS), which had its origins in the 1972 Social Security Amendments, was first applied to hospitals in 1983, and came to fruition with the Balanced Budget Act of 1997. Here, Rick Mayes and Robert A. Berenson, M.D., explain how Medicare’s innovative payment system triggered shifts in power away from the providers (hospitals and doctors) to the payers (government insurers and employers) and how providers have responded to encroachments on their professional and financial autonomy. They conclude with a discussion of the problems with the Medicare Modernization Act of 2003 and offer prescriptions for how policy makers can use Medicare payment policy to drive improvements in the U.S. health care system.

Mayes and Berenson draw from interviews with more than sixty-five major policy makers—including former Treasury secretary Robert Rubin, U.S. Representatives Pete Stark and Henry Waxman, former White House chief of staff Leon Panetta, and former administrators of the Health Care Financing Administration Gail Wilensky, Bruce Vladeck, Nancy-Ann DeParle, and Tom Scully—to explore how this payment system worked and its significant effects on the U.S. medical landscape in the past twenty years. They argue that, although managed care was an important agent of change in the 1990s, the private sector has not been the major health care innovator in the United States; rather, Medicare’s transition to PPS both initiated and repeatedly intensified the economic restructuring of the U.S. health care system.

Product Details

ISBN-13:	9780801888878
Publisher:	Johns Hopkins University Press
Publication date:	12/20/2006
Sold by:	Barnes & Noble
Format:	eBook
Pages:	264
File size:	3 MB
Age Range:	18 Years

About the Author

Rick Mayes, Ph.D., is an associate professor of public policy at the University of Richmond and a faculty research fellow at the Petris Center on Healthcare Markets and Consumer Welfare at the UC-Berkeley School of Public Health. He is the author of Universal Coverage: The Elusive Quest for National Health Insurance and the coauthor of Medicating Children: ADHD and Pediatric Mental Health. Robert A. Berenson, M.D., is a senior fellow at the Urban Institute and coauthor of The Managed Care Blues and How to Cure Them. From 1998 to 2000, he was in charge of Medicare payment policy and managed care contracting in the Health Care Financing Administration (now the Centers for Medicare and Medicaid Services).

Table of Contents

Acknowledgments
List of Acronyms
Introduction
1. Origins and Policy Gestation
2. Development, Growing Appeal, and Passage of Prospective Payment
3. The Phase-In Years and Beginning of "Rough Justice" for Hospitals
4. Medicare Policy's Subordination to Budget Policy, Increased Hospital Cost Shifting, and the Rise of Managed Care
5. The Resource-Based Relative-Value Scale Reforms for Physician Payment
6. The Calm before the Storm
7. The Reckoning and Reversal
Conclusion: How Medicare Does and Should Shape U.S. Health Care
Appendix: Interviews
Notes
References
Index

What People are Saying About This

Rudolf Klein

For trans-Atlantic spectators of the U.S. scene, this book provides an invaluable analysis of the role of Medicare in shaping U.S. health care. Reading it made me realize that seeing Medicare simply as a program for elderly people is to miss its wider impact and its potential for the future development of health care in the United States. Its willingness to question conventional wisdom and shrewd analysis make it an important contribution to the literature.

Rashi Fein

This rich and informative book does so much more than provide a marvelous history of the Medicare prospective payment system. It shows that emerging problems can be solved if we put our minds to that task. I hope it is read carefully and its lessons learned.

Atul Gawande

An exhaustively researched and provocative tale of the politics behind how doctors and hospitals are paid in America—and the roots of our health care morass.

John E. Wennberg

A brilliant history of Medicare's success in taming medical inflation by controlling prices and a sobering account of the challenge of runaway expenditures caused by inflation in the volume and intensity of utilization. This book sets the stage for the debate over Medicare's role in ensuring the quality and efficiency of health care.

Jonathan Oberlander

Quite simply a must read for students of U.S. health care. For those who want to understand what Medicare has done to control its spending, how federal payment policies affect the private sector in health care, and what Medicare can do now to strengthen its cost controls, there is no better place to start.

From the Publisher

An exhaustively researched and provocative tale of the politics behind how doctors and hospitals are paid in America—and the roots of our health care morass.
—Atul Gawande, MacArthur Fellow, author of Complications: A Surgeon’s Notes on an Imperfect Science and Better: A Surgeon's Notes on Peformance

An invaluable resource on the political history of why Medicare is the 800 pound gorilla of U.S. health care. Mayes and Berenson skillfully challenge the assumptions of those convinced that Medicare should be restructured around private health plans. They've produced a policy book that is actually enjoyable to read.
—David Durenberger, chair, National Institute of Health Policy at the University of St. Thomas

Thoughtful, scholarly, and analytically powerful, this book is important for understanding and evaluating the prospective payment system and its impact on Medicare and the health care industry. A good read, with a wealth of historical anecdote and interview material. The final recommendations should be required reading for anyone seeking to reform Medicare or move toward national health insurance.
—David G. Smith, Swarthmore College, author of Entitlement Politics: Medicare and Medicaid, 1995–2001

This rich and informative book does so much more than provide a marvelous history of the Medicare prospective payment system. It shows that emerging problems can be solved if we put our minds to that task. I hope it is read carefully and its lessons learned.
—Rashi Fein, Harvard Medical School, author of The Health Care Mess: How We Got into It and What It Will Take to Get Out

Quite simply a must read for students of U.S. health care. For those who want to understand what Medicare has done to control its spending, how federal payment policies affect the private sector in health care, and what Medicare can do now to strengthen its cost controls, there is no better place to start.
—Jonathan Oberlander, University of North Carolina, Chapel Hill, author of The Political Life of Medicare

Mayes and Berenson tell a fantastic, ironic story about how a price-regulatory reform in our government-run Medicare program drastically changed private-sector health care to be more commercialized and profit driven. This is a must read for anyone wanting to understand the managed care revolution, the managed care backlash, and why the competitive strategy is viewed with great skepticism today.
—Colleen M. Grogan, University of Chicago

A brilliant history of Medicare's success in taming medical inflation by controlling prices and a sobering account of the challenge of runaway expenditures caused by inflation in the volume and intensity of utilization. This book sets the stage for the debate over Medicare's role in ensuring the quality and efficiency of health care.
—John E. Wennberg, director, Center for the Evaluative Clinical Sciences, Dartmouth Medical School

The story of Medicare's futile struggle to control its costs, and a convincing demonstration of the need for major reform of the health insurance system. This is an important contribution.
—Arnold S. Relman, Harvard Medical School, former editor-in-chief, New England Journal of Medicine

For trans-Atlantic spectators of the U.S. scene, this book provides an invaluable analysis of the role of Medicare in shaping U.S. health care. Reading it made me realize that seeing Medicare simply as a program for elderly people is to miss its wider impact and its potential for the future development of health care in the United States. Its willingness to question conventional wisdom and shrewd analysis make it an important contribution to the literature.
—Rudolf Klein, London School of Economics and London School of Hygiene

David G. Smith

Thoughtful, scholarly, and analytically powerful, this book is important for understanding and evaluating the prospective payment system and its impact on Medicare and the health care industry. A good read, with a wealth of historical anecdote and interview material. The final recommendations should be required reading for anyone seeking to reform Medicare or move toward national health insurance.

Colleen M. Grogan

Mayes and Berenson tell a fantastic, ironic story about how a price-regulatory reform in our government-run Medicare program drastically changed private-sector health care to be more commercialized and profit driven. This is a must read for anyone wanting to understand the managed care revolution, the managed care backlash, and why the competitive strategy is viewed with great skepticism today.

Arnold S. Relman

The story of Medicare's futile struggle to control its costs, and a convincing demonstration of the need for major reform of the health insurance system. This is an important contribution.

David Durenberger

An invaluable resource on the political history of why Medicare is the 800 pound gorilla of U.S. health care. Mayes and Berenson skillfully challenge the assumptions of those convinced that Medicare should be restructured around private health plans. They've produced a policy book that is actually enjoyable to read.

Editorial Reviews

This slender volume offers value on several dimensions. First, it is an explication of recent history that connects the dots from prospective payment to Medicare-based deficit reduction to cost shifting to managed care. By the same token, the story here serves as a bracing corrective to the mythology of market-based reform and the assumption that government's role in health is inescapably a negative one.
—Health Affairs

Whether discussing the Social Security Amendments of 1972 or the Balanced Budget Act of 1997, Mayes and Berenson entertain readers with insider anecdotes about the ideological and practical battles government policymakers fought with powerful provider lobbies.
—New England Journal of Medicine

A highly readable book that traces the history of Medicare prospective payment systems from their enactment in 1983 until today.
—Journal of Health Politics, Policy and Law

This book provides an excellent primer for physician leaders on the recent history of Medicare and the politics of elected officials using it as a cash cow. The authors challenge practicing physicians to carefully consider what may work in society’s best interests to improve health outcomes, rather than primarily focusing on how Medicare benefits their net incomes.
—JAMA

Mayes and Berenson offer an admirable product in this book, one that we should use to improve our own studies of the state and the agents who help define it.
—Andrew B. Whitford, International Public Management Journal

From the Publisher

Mayes and Berenson offer an admirable product in this book, one that we should use to improve our own studies of the state and the agents who help define it.

International Public Management Journal - Andrew B. Whitford

Whether discussing the Social Security Amendments of 1972 or the Balanced Budget Act of 1997, Mayes and Berenson entertain readers with insider anecdotes about the ideological and practical battles government policymakers fought with powerful provider lobbies.

New England Journal of Medicine

A highly readable book that traces the history of Medicare prospective payment systems from their enactment in 1983 until today.

Policy and Law Journal of Health Politics

This book provides an excellent primer for physician leaders on the recent history of Medicare and the politics of elected officials using it as a cash cow. The authors challenge practicing physicians to carefully consider what may work in society’s best interests to improve health outcomes, rather than primarily focusing on how Medicare benefits their net incomes.

JAMA

This slender volume offers value on several dimensions. First, it is an explication of recent history that connects the dots from prospective payment to Medicare-based deficit reduction to cost shifting to managed care. By the same token, the story here serves as a bracing corrective to the mythology of market-based reform and the assumption that government's role in health is inescapably a negative one.

Health Affairs