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Chapter 14

Chapter 14. Medicare: The Great Transformation John Oberlander. Medicare: Offspring of NHI Failure. Medicare has its roots in 1910s struggle for national health insurance (NHI) After repeated policy failures: Proponents limited ambitions Sought to expand coverage to “deserving” group

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Chapter 14

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  1. Chapter 14 Medicare: The Great Transformation John Oberlander

  2. Medicare: Offspring of NHI Failure • Medicare has its roots in 1910s struggle for national health insurance (NHI) • After repeated policy failures: • Proponents limited ambitions • Sought to expand coverage to “deserving” group • The elderly

  3. Medicare: Offspring of NHI Failure • Champions of NHI then hoped Medicare would be incrementally expanded to cover all Americans

  4. Legacies of Founding Compromise • To achieve passage: • Medicare proponents were forced to compromise with conservatives on a host of fronts • These compromises made it nearly impossible to expand Medicare later

  5. Provider Accommodation Under Medicare • Compromises were also made with medical providers • Payments under Medicare were to be determined by hospitals, doctors • Led to long-term increases in cost of program

  6. Effects of Accommodation • “Blank check” to physicians, hospitals led to dramatic increase in cost of program • Financial “crises” common in first years of program

  7. Effects of Accommodation • Pressure to reform: • Led to institution of Diagnostic-Related Groups (and successors) in 1980s

  8. Managed Care and Beyond • Prospective payment systems lowered cost of Medicare program • But providers made up the difference by shifting higher costs to private customers • Businesses responded to higher costs by moving into managed care

  9. Managed Care and Beyond • Pressure then built with Republican Revolution of 1994-95 for Medicare to post savings • Incorporate principles of managed care

  10. The Medicare Modernization Act (2003) • Passed under President Bush • Complicated program represented vast expansion of Medicare into prescription drugs • Prominent role retained for private insurers

  11. The Medicare Modernization Act (2003) • Savings partly attained through unique “doughnut-hole” structure • In which benefits curtailed for those facing middling costs

  12. Chapter 14 Summary • Medicare was the orphan of the national health insurance debate • Circumstances at enactment have had profound effects on the way the program has unfolded • Providers accommodated by program framers, particularly in terms of payment structures, amounts

  13. Chapter 14 Summary • Political accommodation led to spiraling costs • Which were then controlled through prospective payment systems • Resultant cost shifting led business to move to managed care plans • Which were later introduced within Medicare

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