Development and Experience with Diagnosis Related Groups (DRGs) in USA

 

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History

Unlike much of Europe and selected other areas of the world, the United States offered no health service plan for two vulnerable, often disadvantaged groups; namely the poor, and the elderly. There are books and chapters written about the struggle to offer health cost protection to the elderly and to the poor since 1919.

Progress finally happened after a series of political compromises and in 1965, the U.S. government passed a law providing health care coverage for two segments of the population not covered by employee benefits. A Federal program called ”Medicare“ covered the population age 65 and above and a joint federal-state program called ”Medicaid“ covered certain categories of people with little or no income. Today, about 85 % of the U.S. population have some coverage for health care services.[1]

Healthcare spending has also been increasing over the years, and in the late 1990 s, US spent over $ 1 trillion on healthcare as compared to $ 4 billion in 1940. This was accompanied with the expansion of hospitals, from 1946 to 1982 there was an increase in number of hospitals, beds, admissions and also spending on hospital services. Until the introduction of DRGs in 1983, U.S. hospitals were reimbursed by insurers for the services that they offered the patients, a system that clearly provides an incentive to offer as many services as possible.

The way the system worked was that the hospitals would set prices for the services they offered. The prices were set so that hospitals would cover the costs they incurred and also have a mark-up providing a surplus over costs. The insurers had to cover these costs and they rose each year.

1 www.casemix.org

2 http://www.empiremedicare.com/newsupdate

3 http://www.geoscape.com/products/catalog/usa/dpdrg.htm

4 http://www.iha.org

5 http://www.healthinfo.eku.edu/JACKSON/HNF306/Assignments/DRGhandout.htm

6 http://www.healthcare-informatics.com

7 http://www.irpsys.com/articles/szh_medi.htm

8 Diagnosis Related Groups (DRGs) and the Medicare program: Implications for Medical Technology

9 http://ioe.engin.umich.edu

10 http://www.archi.net.au

11 www.casemix.org/volume%201/Coffey.html

A. Wertheimer Ph D 

Center for Pharmaceutical Health Services Research · Temple University

3307 North Broad Street · Philadelphia, PA 19140, USA