ABSTRACT
Medicare is now bigger than General Motors and is the country’s largest business-type organization, with spending equal to $212 billion in 1999 (US Department of Health and Human Services 2000). Spending $5,462 per beneficiary, Medicare accounts for about 3 percent of total US Gross Domestic Product (GDP). If its structure remains unchanged, Medicare is projected to account for 5.4 percent of GDP by 2025 (Kellison and Moon 1999). Medicare is growing at more than double the rate of increase of private health spending and over three times the rate of inflation. Yet, despite its size and rate of growth, Medicare spends less than one-half of 1 percent of its budget on research or systems to lower costs or improve quality (Nash 1996). It remains primarily a medical bill payer and, despite Diagnosis Related Groups (DRGs), has done little to flex its considerable financial muscle in health care markets.
