Date of Award

Spring 1985

Document Type




First Advisor

Sister Rose Agnes Louk

Second Advisor

Susan Dean

Third Advisor

Philip Rose


In 1965, Congress passed legislation to provide health insurance for the aged and disabled. This legislation, also known as Public Law 89-97 or Medicare, became effective on July 1, 1966. This act of Congress has had a very extensive effect on the administration of health care since its initiation. Administered by the Social Security Administration and officially titled "Health Insurance for the Aged," it is estimated that this program provides financial assistance to over 25 million people.1 Provisions for this program are contained in Title XVIII of the Social Security Act. Under this program, hospitals provided care to Medicare patients and were subsequently reimbursed by the government through fiscal intermediaries such as the Blue Cross Association. This traditional method of payment was patterned after the cost-based retrospective reimbursement used by Blue Cross and other private insurance agencies.

In order to be licensed for Medicare, hospitals must meet certain requirements outlined in Regulation Number 5, Federal Health Insurance for the Aged. For example, hospitals must be accredited by the Joint Commission on

Accreditation of Hospitals and must meet certain "Conditions of Participation" in order to be eligible for Medicare funds. Since the Medicare legislation was implemented, numerous provisions have been put into effect regarding reimbursement. In 1972, the Social Security Administration was given the authority to "engage in experiments and demonstration projects in order to determine the advantages and disadvantages of making payments to Medicare providers on a prospective basis."2 This same piece of legislation also authorized the Administration to set prospective cost limits on services rendered to Medicare patients.