limitations, the eight hundred pound gorilla of the health care establishment. Medicare standards tend to shape industry wide practices, as in the case of the "Diagnosis Related Group" (DRG) payment program, which originated with Medicare and has since been applied by a number of private insurers. How the problems of Medicare are dealt with will probably shape the overall future of the American health care system.
In the 1960s, when Medicare was established, along with Medicaid and neighborhood health care clinics, the policy goal being pursued was to maximize accessibility and availability of services. Conservatives decried Medicare, and the medical establishment fought it, as an opening wedge towards their nemesis: "socialized medicine." But by the 1970s and early 1980s, the goal of broader availability was being pushed out of the public debate by concerns over rising costs. Between the 1960s and the 1990s, medical care cost rose from six percent to eleven percent of GNP, and increased fivefold in constant value dollars (Marmor,
...