Healing Medicare Hospital Recidivism: Causes and Cures

Abstract

The role of Medicare in our national market for acute care hospital services is that of a power buyer. Medicare beneficiaries in 2008 included some 45.2 million people. Total benefits paid in 2008 were $462 billion, including 29% of all hospital spending.2 Medicare’s dominance in the buyer’s market for acute care hospital beds renders the program particularly well- suited to scrutinize the role of acute care hospital services in producing effective and efficient outcomes for Medicare beneficiaries. "[I]f there are to be far-reaching changes in the way medicine is practiced in this country, Medicare will have to drive them." It is a historical irony that a program, a scaled-down version of national health insurance, could have grown to this power buyer status; but the history of Medicare is full of ironies - the greatest of which may prove to be that Medicare reforms now sit at the very center of the funding mechanisms for the 2010 Patient Protection and Affordable Care Act (PPACA).

Keywords: Medicare, payment systems reform

JEL Classification: K32, K23, K0, I11, I18