Medicare, Medicaid, and Cost Regulations

Organizational Interaction with CMS

The most important reason for a healthcare organization to understand Medicare and Medicaid is the regulations inherent in it. Both programs provide the incentives for the clinical organizations which demonstrate the necessary level of healthcare quality. While Medicare and Medicaid are commonly associated with financial help for the population with limited resources, it also has a visible effect on the performance of the clinical practices, who strive to comply with the standards imposed by both programs. The Medicare Trust Fund is tightly regulated to limit payments only to those performed in the most appropriate conditions, which eliminates unnecessary expenses. Thus, understanding has an obvious direct impact on the organization’s financial performance. Second, understanding provides the organizations with means to protect themselves from the unfair and unsubstantiated complaints leading both to the decline of the reputation and the monetary refunds and compensations. The former contributes to the long-term performance while the latter has an immediate result on the profitability of the organization.

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The interaction with the Center for Medicare and Medicaid services is not limited to healthcare organizations. Other types include the beneficiary and family-centered care organizations – entities that monitor the integrity of services by reviewing and scrutinizing complaints and ensuring their consistency and quality innovation networks – organizations that promote quality improvements and create meaningful quality measurement tools (KEPRO, 2014). Finally, several Health and Human Services agencies cooperate with Medicaid. The prominent example of such cooperation is The Office of the National Coordinator for Health Information Technology (ONC), which oversees the integration of the IT solutions, including the EHR, in the healthcare field (DeSalvo, Dinkler, & Stevens, 2015), and ensures the necessary level of the system’s security and privacy.

Legislative Cost Regulations

One of the examples of legislative attempts to reduce Medicare costs was the introduction of the commercial ACO contract. The idea behind the regulation was that the well-defined contract would eliminate unnecessary expenses and, at the same time, improve the quality of services. In theory, this is achieved by the flexibility offered by the ACO structure as a result of the lack of federal regulations. The contract of such kind may rely on several independent healthcare entities rather than a centralized structure, providing a more diverse financing opportunities. However, under closer inspection, the benefits become far more modest. For instance, a study conducted by McWilliams, Landon, and Chernew (2013) assessed the actual reduction of costs and improvement of quality associated with the introduction of the practice. The results suggested that while there was indeed a reduction in expenses, the overall quality was unchanged. According to the authors, such an outcome is due to the involvement of a large number of healthcare providers (McWilliams, Landon, & Chernew, 2013). In other words, the scheme which provided flexibility also introduced uncertainty with different providers reacting differently to the contract terms and conditions. Nevertheless, it is possible to say that the cost reduction goal was partially reached.

Another example is the state regulation of the individual eligibility for high-cost drugs, such as the hepatitis C drug sofosbuvir and the inclusion of additional requirements for eligibility such as the abstinence from alcohol use for the patients. The attempt yielded positive results but was criticized for not being based on evidence and raising introducing several ethical issues (Sarpatwari, Avorn, & Kesselheim, 2016).

Both examples illustrate the possible shortcomings of the legislation. Thus, in my opinion, today’s legislation may be successful than the previous attempts under the condition that no marginally related issues of ethical or functional variety surface over time.


DeSalvo, K. B., Dinkler, A. N., & Stevens, L. (2015). The US Office of the National Coordinator for Health Information Technology: progress and promise for the future at the 10-year mark. Annals of Emergency Medicine, 66(5), 507-510.

KEPRO. (2014). BFCC-QIO fact sheet. Web.

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McWilliams, J. M., Landon, B. E., & Chernew, M. E. (2013). Changes in health care spending and quality for Medicare beneficiaries associated with a commercial ACO contract. JAMA, 310(8), 829-836.

Sarpatwari, A., Avorn, J., & Kesselheim, A. S. (2016). State initiatives to control medication costs—can transparency legislation help?. New England Journal of Medicine, 374(24), 2301-2304.

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