Which option accurately reflects Medicare's Prospective Payment System?

The option indicating that hospitals bear the responsibility for cost-effective treatment per diagnosis is accurate in the context of Medicare's Prospective Payment System (PPS). Under the PPS, hospitals are reimbursed a fixed amount for services based on the patient’s diagnosis as classified within a Diagnosis Related Group (DRG). This means that hospitals must manage their costs effectively to provide necessary care while also generating a profit, as the payment does not vary with the actual cost incurred for individual patients. This encourages hospitals to be efficient and cost-effective, promoting the delivery of high-quality care within budgetary constraints.

Regarding the other options, reimbursement under Medicare’s Prospective Payment System is determined prospectively (not retrospectively), and while all Medicare inpatients are indeed categorized into DRGs for payment purposes, the answer focuses specifically on the responsibilities of hospitals related to cost management, which distinguishes it as the most accurate reflection of the system. Lastly, the involvement of federal government subsidies for Part B trust funds is unrelated to the core principles of the Prospective Payment System as described, focusing instead on the overall reimbursement framework.