Final answer:
The inpatient prospective payment system (IPPS) resulted in Medicare using a predetermined rate for each hospital discharge, based on Diagnosis-Related Groups (DRGs). Medicare Part A covers these services, funded by payroll deductions, and requires a deductible and potentially copayments, without a cap on total expenses.
Step-by-step explanation:
The inpatient prospective payment system (IPPS) resulted in Medicare reimbursing hospitals for inpatient hospital services according to a predetermined rate for each discharge. This system classifies each inpatient stay into a Diagnosis-Related Group (DRG), which determines the payment amount. Hospitals are then paid a fixed amount for each case in a given DRG, regardless of the actual cost of the care provided, incentivizing efficiency and cost control.
Medicare Part A covers part of these inpatient hospital charges for eligible individuals, which is financed through payroll deductions and contributions from employers. Beneficiaries are required to pay a deductible before Medicare payments begin, and may also be responsible for copayments for various services. Notably, there are no caps on the total expenses that a person can incur under Medicare Part A.
The IPPS and DRG-based payments are central to understanding how inpatient care is financed and incentivized in the United States. Research, such as the one conducted by Stensland, Watson, and Grazier, helps to provide insights into healthcare costs and the implications of this payment system for hospitals and patient care.