NATIONAL BUREAU OF ECONOMIC RESEARCH
NATIONAL BUREAU OF ECONOMIC RESEARCH

Medicare Policy in the 1990s

Joseph P. Newhouse

NBER Working Paper No. 8531
Issued in October 2001
NBER Program(s):   HE

I describe several changes to Medicare in the 1990s, their rationale, and their likely effects. I focus principally on issues in the administered price systems Medicare uses to pay medical providers, especially those used for post-acute care providers, Health Maintenance Organizations (HMOs), and physicians. The changes to these systems in the 1990s, although directed at important problems, have introduced new and serious problems of their own. For example, the post-acute care system now pays different amounts for the same service, depending on the site of care, and the HMO system is on a trajectory to pay substantially less than traditional Medicare in high rate areas and more in low rate areas, thereby unbalancing local medical markets. I consider future directions for the program, including its long-term financing and a prescription drug benefit.

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Document Object Identifier (DOI): 10.3386/w8531

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