The systematic search for quality improvement has been introduced and implemented in many institutions all over our workplace and society. The special science that is needed for it is well documented in the Total Quality Management and Continuous Quality Improvement movements (Deming) The health care industry has not been left out of these improvements in management and quality and it is said that the nursing profession discovered the quality improvement frame in the late 1980s. This development took on a stronger form when it was realized that base quality-improvement hard work on the organized compilation and examination of medical data and the implementations of tools and processes to adjust deliverance and outcomes of care. Acute care settings developed the most and a whole lot less attention was paid to organizations that were providing the society with nursing homes or other long term care facilities. But as time goes on, more and more nursing home managers and clinicians are now realizing the quality paradigm (Popejoy et al), but large-scale implementation of policies and programs that would radically transform organizational culture has yet to occur.
Medicare presents a much greater challenge than Social Security, both in the magnitude of the projected deficits and in the complexity of the issues. Unlike with Social Security, reform involves not simply selecting among a list of plausible options, but rather figuring out how to control long- run costs and ensure the efficient delivery of quality care in one component of a very complicated health care system. Medicare is composed of two parts. Part A (hospital insurance) covers inpatient hospital services, care at skilled nursing facilities, home health care, and hospice care. Part B covers primarily physician and outpatient hospital services. Part A is financed by a 2.9 percent payroll tax, shared equally by employers and employees. Like their Social Security counterparts, the Medicare Trustees project the status of the hospital insurance trust fund over a 75- year period. These projections are highly uncertain given the time horizon and the difficulty in estimating future medical costs. Nevertheless, they constitute the best available estimate of the status of the Part A portion of Medicare. The projected 75- year deficit in Part A is more than twice the Social Security deficit in absolute terms, and many times larger relative to the size of the program. As a fraction of GDP, Part A expenditures are projected to triple over the next 75 years, from 1.7 percent in 1996 to about 5 percent in 2070 (Fenz).
Medicare Part A is also facing a pressing short- term problem. If no action is taken, the Part A trust fund is projected to be exhausted by 2001, and the gap between revenues and benefit payments widens very rapidly thereafter. Medicare reforms proposed by this Administration would extend the life of the Part A trust fund well into the next decade. Enacting these reforms is an absolutely necessary first step, but none of the current proposals completely solves the long- run problem.
Medicare Part B is financed primarily from general revenues and enrollee premiums. In 1996, premiums contributed about 25 percent of Part B income, with most of the remainder from general revenues. Although spending from this fund has grown rapidly, insolvency is not an issue, since general revenues are required to cover any shortfalls. However, the growth in Part B spending increases Federal expenditures and contributes directly to the unified deficit.
Reforming Medicare will require slowing the growth in health care prices and utilization. Since either Medicare or private insurance pays for most health care expenditures for the elderly, individuals have little incentive to seek out the most cost- effective delivery of medical care. Moreover, fee- for- service payment still dominates the Medicare market. Approximately 90 percent of Medicare beneficiaries have fee- for- service care, compared with fewer than 30 percent of the nonelderly. Hence, some Medicare providers may have an incentive to supply costly services that offer uncertain medical benefits. This potential misalignment of incentives is reinforced by the fact that the relative effectiveness of alternative treatments is often poorly understood, and consumers generally rely on providers' recommendations. For the nonelderly, any tendency toward overuse of medical services is increasingly kept in check by employers and their insurers. The dramatic movement toward managed care (discussed below) reflects determined efforts to ensure that health care is delivered in a cost- effective manner. Some working individuals may also have incentives to keep costs down because they face substantial out- of- pocket payments. These incentives may be muted for retirees, who frequently have virtually complete insurance coverage on a fee- for- service basis for an array
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