Effect of Medicare Payment on Rural Health Care Systems

Medicare payments constitute a significant share of patient‐generated revenues for rural providers, more so than for urban providers. Therefore, Medicare payment policies influence the behavior of rural providers and determine their financial viability. Health services researchers need to contribute to the understanding of the implications of changes in for‐service payment policy, prospects for change because of the payment to Medicare +Choice risk plans, and implications for rural providers inherent in any restructuring of the Medicare program. This article outlines the basic policy choices, implications for rural providers and Medicare beneficiaries, impacts of existing research, and suggestions for further research. Topics for further research include implications of the Critical Access Hospital program, understanding how changes in payment to rural hospitals affect patient care, developing improved formulas for paying rural hospitals, determining the payment‐to‐cost ratio for physicians, measuring the impact of changes in the payment methodology used to pay for services delivered by rural health clinics and federally qualified health centers, accounting for the reasons for differences in historical Medicare expenditures across rural counties and between rural and urban counties, explicating all reasons for Medicare +Choice plans withdrawing from some rural areas and entering others, measuring the rural impact of proposals to add a prescription drug benefit to the Medicare program, and measuring the impact of Medicare payment policies on rural economies.