MEDICARE PROSPECTIVE PAYMENT SYSTEM: INTENT AND FUTURE DIRECTION.

Abstract

Increases in health care expenditures, especially for hospital care, have been a persistent and growing problem for the Medicare program and the nation for nearly two decades. Recognizing its potential as a pragmatic yet immediate solution to spiraling costs, Congress recently enacted the Prospective Payment System (PPS) for most inpatient hospital services covered by Medicare. The PPS legislation represents a fundamental change in the way hospitals are paid for care delivered to Medicare beneficiaries. Changes in the ways hospitals will manage themselves and conduct their business--present and future--are examined, and some initial data trends are presented. Significant future policy issues related to the PPS and the health care delivery system are also discussed.