By Sean Nicholson
This research stories the rationales, legislative historical past, and fiscal incentives of either varieties of health center subsidies.
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Additional resources for Medicare Hospital Subsidies: Money in Search of a Purpose
If Medicare’s total hospital expenditures were essentially capped, then this increase in IME payments was implicitly funded by nonteaching hospitals, which were receiving smaller DRG payment increases than they would have if the IME policy was designed so that expenditures were fixed. IME expenditures increased by $3 billion in real terms between 1987 and 1997. If the government wanted this to occur, it should have legislated this increase rather than allowing the decisions of teaching hospitals and an open-ended IME policy to dictate the increase.
S. Congressional Budget Office 1990). 2 percent higher, on average, than hospitals with low values of the DSH index. 2 percent of their DRG revenue. The new study led to only minor revisions of the DSH rules. Meanwhile, Congress had relaxed the eligibility rules and revised the formulas in 1988 and 1989, causing Medicare DSH expenditures to increase rapidly as more hospitals became eligible and the payments became more generous. The Medicaid program itself expanded from 22 million beneficiaries in 1985 to 36 million in 1996, and since one of the ratios in the DSH index is the ratio of Medicaid patient days to total hospital days, this expansion and the open-ended nature of the DSH formula also caused Medicare DSH payments to increase.
In order to identify the effect of the IME and DSH policies on Medicare admissions separately from the effect of the entire PPS system, I analyze how hospitals responded to the revision of the IME policy and introduction of the Medicare DSH policy in May 1986, controlling for THE EFFECT OF THE MEDICARE GME AND DSH SUBSIDIES 41 the impact of the PPS system. Therefore, ∆P in equation (5) refers to the change in a hospital’s DRG mark-up in 1986 caused by the revision of the IME policy and the introduction of the DSH policy.