Medicare’s Challenges in Paying Providers

Medicare uses a variety of administered price systems to pay health care providers. In setting the amounts it pays, it faces significant challenges both to avoid distorting the care patients receive and not to overpay. This article describes issues in paying physicians, post-acute care providers, and health plans, all areas of recent ferment that are likely to see continued change. The conclusion remarks on the prescription drug benefit and the possibility of paying higher quality providers additional amounts. (January 2006)