Health Affairs
Web Exclusive
January 8, 2003
Should Public Policy Seek To Control the Growth of Health Care Spending?
By Henry J. Aaron
Who makes the decisions?
Some observers believe that people can impose such budget constraints through their decisions about the purchase of insurance. This is the way most markets work, and normally they work quite well. In the case of health care, I believe that this view is simply wrong in practice. The inefficiencies of the individual health insurance market are insoluble. More importantly, the incentives and morality of providers and the wishes of patients will defeat private regulation every time because such regulation lacks legitimacy. In one way or another, private agents charged with the task of reining in costs will come a cropper for the same reason that the American public effectively fired managed care. I may-underscore may-join with my fellow citizens to support politically determined limits on care that I or my spouse or child may receive. That is how successful cost control works in other countries. But I will not-underscore not-authorize some corporate executive to do so.
Other countries have shown that government regulation can control the level of health care spending and the pay providers receive. They may have made a Faustian bargain. Clearly, most of them do not think so. Many have wisely begun to try to mobilize market incentives to promote efficient resource allocation. However, none has relied on market incentives to establish overall health care budget constraints. Whatever this means, the United States clearly has not yet found effective ways to hold down health care spending in ways that would not entail far more central government direction than Americans seem willing to accept.
http://www.healthaffairs.org/WebExclusives/Spending_Web_Excl_010803.htm