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The Future Of Medicare Hospital PaymentThe combination of health care cost growth exceeding general inflation and the swelling of beneficiary rolls with baby boomers will create fiscal pressure for Medicare. Despite dramatic declines in the growth of hospital costs following the introduction of Medicares prospective payment system (PPS), the growth in Medicare hospital spending per beneficiary has been close to three times the overall rate of inflation since 2000. This paper examines issues related to Medicares using its pricing policies to more aggressively pursue hospital cost containment. I discuss the need to calibrate payments to reflect expected necessary costs to reduce potential effects on beneficiaries access, quality of care, or technological improvements.
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