Health Care

The historic payment system for reimbursing hospitals both by insurers and by Medicare

has been Retrospective Cost Based Reimbursement(RCBR). This system of reimbursement

encourages hospitals to over charge in order to cover the costs of the uninsured who utilize the

hospital. Charges have continued to rise year after year eventually putting the employers at a point

where they could no longer afford the payments.

For physician reimbursements, both insurers and Medicare employed the Usual and

Customary(U+C) approach to reimbursement. This practice, which averaged the charges for a

procedure in a region, also encourages doctors to over-charge in order to raise the average amount

paid to them for a procedure. These two systems, RCBR and U+C eventually started to suck too

much money out of the insurers, employers, and the Medicare/Social Security trust fund so that

interventions were deemed necessary.

Perhaps the biggest intervention adopted by the private sector to reduce medical service