New directions in Medicaid payment for hospital care

Medicaid now pays for 20 percent of all inpatient stays and plays an especially important role in funding obstetric, pediatric, and mental health care. In coming years, policy decisions on inpatient payment may be the most consequential since diagnosis-related groups (DRGs) were introduced two decades ago. This study describes Medicaid's growing role in purchasing inpatient care, reports Medicaid-specific results from an evaluation of three DRG algorithms, provides a case study of a new payment method designed in Mississippi, and summarizes recent developments in paying for quality.