ArticleMedicare's Operational History and Impact on Health CareKulesher, Robert R. PhDAuthor Information From the Department of Health Services and Information Management, School of Allied Health Sciences, East Carolina University, Greenville, NC. Correspondence: Robert R. Kulesher, PhD, Department of Health Services and Information Management, School of Allied Health Sciences, East Carolina University, 216 Carol G. Belk Building (HSIM), Greenville, NC 27858-4353 (e-mail: [email protected]). The Health Care Manager: January 2006 - Volume 25 - Issue 1 - p 53-63 Buy Abstract Medicare was originally designed in the 1960s to fit into the existing health care delivery system. However, the program's early years showed an inflationary impact on health care costs. Medicare was the second largest federal domestic program and the fastest growing one, making it a target for those concerned about the size of government in general. By 1980, Medicare constituted 15% of the nation's expenditures for personal health care; and Medicare's administrators recommended substantive changes in provider payments through the introduction of the prospective payment system. Prospective payment system legislation impacted hospitals initially and later skilled nursing facilities and home health agencies. As policymakers made changes in Medicare payments to providers, providers made changes in the way services were delivered. What eventually evolved, in an insidious manner, was implicit management of the nation's health care delivery system by the Medicare program. © 2006 Lippincott Williams & Wilkins, Inc.