ABSTRACT
Fiscal discipline virtually disappeared from the health-care marketplace during the first two decades of Medicare when the principal payers-employers, private health insurance, and government-tended to honor, with few or no questions, all bills submitted for reimbursement by providers. It was not until the mid1980s that Medicare began to pay closer attention to dollar costs. At the same time employers and private health insurance plans looked toward managed care plans to moderate their annual increases in premium costs. Medicare shifted from a cost-plus reimbursement for hospital inpatient care to a prospective payment system. It took until the early 1990s for the market to fully respond to these developments with large-scale deceleration in employers’ annual contribution to premium increases. In contrast, Medicare outlays continue to rise at an annual rate of around 10% (1).
