Document ID: ./input/supremecourt_opinions/opinions/boundvolumes/529bv.pdf
Page Number: 760

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Unit: $U55

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Cite as: 529 U. S. 667 (2000)

685

Thomas, J., dissenting

individuals covered by the program will not be borne by indi-
viduals not so covered, and the costs with respect to individ-
uals not so covered will not be borne by the program”).

The “prospective payment system” adopted by Congress
in 1983 to increase efﬁciency and reduce costs operates some-
what differently from the “reasonable cost” provisions but
is also designed to reimburse hospitals for the cost of provid-
ing care to Medicare beneﬁciaries. 42 U. S. C. § 1395ww;
42 CFR pt. 412 (1999). Under this system, the Medicare
program pays hospitals a ﬁxed price for each case based on
the patient’s diagnosis related grouping (DRG), which is
assigned based on the patient’s diagnosis, age, and sex,
among other things. 42 U. S. C. § 1395ww(e); 24 CFR
§ 412.60 (1999). The DRG ﬁgure represents the average
cost of treating patients within the DRG. 42 U. S. C.
§ 1395ww(d)(2); 49 Fed. Reg. 251 (1984). Signiﬁcantly, be-
cause hospitals are paid ﬁxed amounts based on the DRG,
the hospital, like any other private contractor, bears the risk
of higher costs. See Kinney, Making Hard Choices under
the Medicare Prospective Payment System: One Administra-
tive Model for Allocating Medical Resources under a Govern-
ment Health Insurance Program, 19 Ind. L. Rev. 1151, 1151–
1152 (1986).

Thus, the statute and regulations make clear that medical
providers are entitled only to reimbursement for the actual
or estimated cost of services rendered to Medicare patients
and that individual elderly and disabled patients—not hospi-
In-
tals—are the beneﬁciaries of the Medicare program.
deed, the Social Security Act explicitly says so. See 42
U. S. C. § 1395a(b)(5) (1994 ed., Supp. III) (“The term ‘medi-
care beneﬁciary’ means an individual who is entitled to
beneﬁts” (emphasis added)). The Act repeatedly refers
to Medicare “beneﬁts” as assistance provided to individual
participants, rather than to medical providers. See, e. g.,
§ 1395a (“Any individual entitled to insurance beneﬁts under
this subchapter”); § 1395b–2 (“Such notice shall be mailed an-