National Health Expenditure Limits: The Case for a Global Budget Process

Abstract

The health reform cost-containment debate has set up a dichotomy between market and regulatory approaches. Expenditures are excessive in the American health system because there is no effective constraint on aggregate demand, and the rigid limits imposed by sectoral global budgets in other nations do not effectively use supply side forces to achieve efficiency. The case for an intermediate option is presented, a process that can flexibly encompass both what buyers are willing to pay and what suppliers are willing to accept. A negotiated contracting process for multiple payors and multiple providers could constrain aggregate demand and harness provider incentives.