Medicare's Prospective Payment System

Drawing on a review of the recent academic and trade literature and interviews with representatives of major national health care groups, this report describes reactions in the health care community to the introduction of prospective reimbursement for inpatient Medicare coverage. It provides a comprehensive accounting of the range of issues associated with prospective reimbursement and describes the political environment in which those issues will be resolved. The findings suggest that members of the health care community support the policy of prospective payment, at least in principle. Although they debate what they believe are the faults of the new system, they appreciate the fiscal and political realities, and do not expect to return to the former cost-based system. In addition, they continue to approve of the concept of prospective payment and competition in the health care delivery system.