No Pain, No Gain

Abstract

THERE is a widespread belief in the United States that expenditures for health care are too high and growing too rapidly. This belief has stimulated numerous policy proposals for containment, including such diverse approaches as managed care, managed competition, insurance company regulation, diagnosis related group reimbursement, global budgets, and expenditure caps. The pros and cons of alternative approaches to cost containment have been debated extensively; I have no intention of proposing still another plan. Instead, I shall offer a framework for thinking about cost containment that is applicable to all possible proposals. In developing this framework I will first consider why public policy should pay any special attention to health expenditures. Two popular explanations—share of GNP (gross national product) and effect on global competitiveness—will be examined and rejected; then three valid explanations will be discussed. Finally, I will show why every approach to cost containment requires pain if there