Medicare Payment and Hospital Capital: Future Policy Options

Abstract

Prologue:At a time when hospitals are largely consumed by the challenging task of implementing Medicare's prospective payment system (PPS), the Reagan administration is putting the finishing touches on a report to Congress which will recommend how capital payments should be incorporated into the new payment scheme. Congress established a deadline of October 1, 1986, for enacting new hospital capital legislation. In this article, two well-respected economists who are often consulted by the public and private sectors for approaches to complicated policy problems, set out options that Congress will consider when it turns to the hospital capital issue. Until one year ago, Gerard Anderson was a central figure within the Department of Health and Human Services (DHHS) in the development of the administrations prospective payment policy. Over the course of his six-year stint at the department, Anderson served four assistant secretaries in a similar technical capacity, thus demonstrating an ability to bridge a broad philosophical gap while maintaining the respect of his political superiors. An economist with a Ph.D. from the University of Pennsylvania, Anderson left DHHS to become associate director of The Johns Hopkins University Center for Hospital Finance and Management. Paul Ginsburg was deputy assistant director for income security and health of the Congressional Budget Office (CBO) before his recent departure for the Rand Corporation. In his six years at CBO, Ginsburg developed a reputation as an analyst who could provide policy guidance on issues independent of that offered by the administration. At Rand, Ginsburg will become involved in consulting with the Health Care Financing Administration on an evaluation of prospective payment. Ginsburg, who holds a Ph.D. in economics from Harvard University, was an associate professor at Duke University before joining CBO.