Medicare as Insurance Innovator

Abstract

The stylized fact is that while private insurance has tended to innovate on the benefit design side of the insurance contract, Medicare has lead innovation on the payment side. Traditional or Fee-For-Service Medicare has produced many innovations in the payment for health care services, such as Prospective Payment for hospitals, Diagnostic-Related Groups to categorize care, and the Resource-Based Relative Value System used by the program to pay physicians, while private insurance has produced a series of benefit design innovations. This story misses one important example of Medicare benefit innovation: the creation of the Medicare hospice benefit. A key question is whether Medicare can again lead a system-wide benefit design effort to improve upon current hospice and palliative care policy.