Medicare's transition to national payment rates: effects on hospitals.

Abstract

Prologue: No issue stirs the average member of Congress more predictably and often with greater passion than a proposal that somehow would redistribute the federal largesse between sections of the country or congressional districts. Thus, it was somewhat of a surprise when Congress —overriding its reluctance to redistribute federal dollars — designed Medicares new prospective payment system in a way that guaranteed a significant shift in where that program's revenues would be spent Now, several years later, two researchers at the Prospective Payment Assessment Commission have looked at the distributional effects of Medicare's movement to national rates. Lisa Potetz holds a master's degree in public policy from the University of Michigan. Thomas Buchberger holds a master's degree in applied economics and public health from the same school. The commission, or ProPAC as it has become known in health policy circles, itself has played an interesting role in the implementation of prospective payment. Created by the Congress as an independent watchdog on the activities of the Health Care Financing Administration (HCFA), ProPAC is a commission of knowledgeable outsiders who have been given license to ask questions of the executive agency, conduct independent analyses and generally serve as another voice in relationship to how prospective payment is affecting Medicare, its beneficiaries and the providers of service. Relations between ProPAC and HCFA have been generally good; their staffs share data and inform each other of what they are doing. They have had their differences, however, in interpreting information, such as that provided by Potetz and Buchberger on the distributional effects of paying all hospitals on the basis of average national rates. ProPAC's commissioners, fearing that the impact could spell economic disaster for too many hospitals, called for a pause in the movement of national rates. HCFA, reflecting the administrations strong belief in market mechanisms, said full speed ahead.