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By Harry Ting, PhD, Health Economist

Medicare is the major driver of innovation in health insurance reimbursement. Early examples were establishing per case rates for hospitals in the form of DRG payments and requiring three day hospital stays for coverage of skilled nursing home care.  More recently, it adopted payment reductions for hospital acquired conditions and penalties for preventable hospital readmissions.  Under the Affordable Care Act, Medicare is introducing medical homes, accountable care organizations, bundling and payment for care management.  In all these areas, private insurers have followed the example of Medicare.  Recognizing the influence of Medicare, it is crucial that its payment policies be carefully designed and scrutinized.

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