Global Budgeting and the Control of Hospital Costs

Abstract

This paper attempts to answer the question: Would global budgeting control hospital costs in the United States? It reviews the development of health insurance and the growth of specialization in the United States, as well as the experience of Canada in attempting to control costs in a fee-for-service national medical care program. It concludes that the main causes of cost escalation in the U.S. are fee-for-service and overspecialization, and urges adoption of the NAPHP proposal for payment of physicians in a national program, i.e. global budgeting for the entire package of ambulatory and institutional services. It also presents a nine-point program for immediate State action to lower costs.